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Commodities Fell on Rising Crude Oil Supply Expectations

Commodities fell as the global crude oil supply and demand balance shifted from undersupplied to oversupplied.


The Bloomberg Commodity Index Total Return decreased for the month, with 10 out of 22 constituents posting losses.

Credit Suisse Asset Management observed the following:

  • Energy declined 3.34% as Crude Oil and petroleum products were weighed down by increased exports from the OPEC-led production group and after the US provided waivers to some crude oil importers to continue purchasing supplies from Iran.
  • Precious Metals increased 0.23% after the US Federal Reserve may have indicated that it was closer to finishing hiking the Federal Funds Rate than previously anticipated.
  • Agriculture gained 0.43%, led higher by Soybeans, after constructive statements from the US administration on US-China relations increased expectations that US soybean exports to China will resume sooner than expected.
  • Industrial Metals rose 1.86% on improved market sentiment towards the ongoing US-China trade dispute and on rising prospects for new stimulus measures in China after the country’s manufacturing growth slowed in October.
  • Livestock was up 2.30%, led higher by Lean Hogs, after a growing number of reported African Swine Fever cases in Chinese feedlots heightened concerns of a large scale outbreak, which could increase demand expectations for US pork exports.

Nelson Louie, Global Head of Commodities for Credit Suisse Asset Management, said: “US natural gas inventories remained below the five-year average by month end. With limits to both storage at and transportation to key demand centers, the US has become more susceptible to supply shocks if the winter turns out to be colder than normal. Elsewhere, China began its second year of winter pollution policies to combat smog produced by metals smelters during the coal-intensive season. Forecasts of warmer temperatures and less rain in the region may worsen air pollution conditions and force the central government to be stricter with enforcement, potentially reducing metals production. However, how strictly the regional governments, with preferences to preserve the economy in their localities, will adhere to these policies during the trade conflict with the US remains a question. As Brazil’s rainy season begins in December, a particularly wet December may disrupt soybean crops that were planted earlier. With soybean inventories tight outside of the US, reduced production could incentivize China to resume imports from the US.”

Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added: “OPEC and other countries decided to reduce production on December 6th to keep global crude oil inventories from growing. This may help crude oil prices to recover, and consequently, increase already-strong production growth in the United States. Labor, wage and consumer spending data continue to show strength in the US, supporting the high expectations for the Fed to raise the Federal Funds Rate at its next policy meeting on December 18th – 19th. There is much more uncertainty about the path of the rate in 2019. If trade conflicts between major powers subside, then global growth prospects may improve, and the Fed may end up raising rates multiple times in 2019. Even a modest acceleration in the global economy could potentially be beneficial to commodity prices. However, if the Fed is closer to finishing its tightening cycle, then it may imply that it is more concerned about the economic outlook ahead as the Fed seeks to moderate policy to soften any potential recessionary impacts. Either of these scenarios may also be favorable for commodities as commodities have historically out-performed traditional asset classes in late stage expansionary and early stage recessionary cycles.”

About the Credit Suisse Total Commodity Return Strategy

Credit Suisse’s Total Commodity Return Strategy is managed by a team with over 35 years of experience, and seeks to outperform the return of a commodities index, such as the Bloomberg Commodity Index Total Return or the S&P GSCI Total Return Index, using both a quantitative and qualitative commodity research process. Commodity index total returns are achieved through:

  • Spot Return: price return on specified commodity futures contracts;
  • Roll Yield: impact due to migration of futures positions from near to far contracts; and
  • Collateral Yield: return earned on collateral for the futures.

As of November 30, 2018, the Team managed approximately USD 8.3 billion in assets globally.

Credit Suisse AG

Credit Suisse AG is one of the world’s leading financial services providers and is part of the Credit Suisse group of companies (referred to here as ’Credit Suisse’). Our strategy builds on Credit Suisse’s core strengths: its position as a leading wealth manager, its specialist investment banking capabilities and its strong presence in our home market of Switzerland. We seek to follow a balanced approach to wealth management, aiming to capitalize on both the large pool of wealth within mature markets as well as the significant growth in wealth in Asia Pacific and other emerging markets, while also serving key developed markets with an emphasis on Switzerland. Credit Suisse employs approximately 45‘560 people. The registered shares (CSGN) of Credit Suisse AG’s parent company, Credit Suisse Group AG, are listed in Switzerland and, in the form of American Depositary Shares (CS), in New York. Further information about Credit Suisse can be found at

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This document was produced by and the opinions expressed are those of Credit Suisse as of the date of writing and are subject to change. It has been prepared solely for information purposes and for the use of the recipient. It does not constitute an offer or an invitation by or on behalf of Credit Suisse to any person to buy or sell any security. Any reference to past performance is not necessarily a guide to the future. The information and analysis contained in this publication have been compiled or arrived at from sources believed to be reliable but Credit Suisse does not make any representation as to their accuracy or completeness and does not accept liability for any loss arising from the use hereof.

Certain information contained in this document constitutes “Forward-Looking Statements” (including observations about markets and industry and regulatory trends as of the original date of this document), which can be identified by the use of forward-looking terminology such as “may”, “will”, “should”, “expect”, “anticipate”, “target”, “project”, “estimate”, “intend”, “continue” or “believe”, or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties beyond our control, actual events, results or performance may differ materially from those reflected or contemplated in such forward-looking statements. Readers are cautioned not to place undue reliance on such statements. Credit Suisse has no obligation to update any of the forward-looking statements in this document.

Certain risks relating to investing in Commodities and Commodity-Linked Investments: Exposure to commodity markets should only form a small part of a diversified portfolio. Investment in commodity markets may not be suitable for all investors. Commodity investments will be affected by changes in overall market movements, commodity volatility, exchange-rate movements, changes in interest rates, and factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. Commodity markets are highly volatile. The risk of loss in commodities and commodity-linked investments can be substantial. There is generally a high degree of leverage in commodity investing that can significantly magnify losses. Gains or losses from speculative derivative positions may be much greater than the derivative’s original cost. An investment in commodities is not a complete investment program and should represent only a portion of an investor’s portfolio management strategy.

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