NatGas slumps, copper jumps as virus maintain its grip – Saudi Gazette

NatGas slumps, copper jumps as virus maintain its grip – Saudi Gazette

By Ole Hansen

The commodity market looks set to finish Q2, or the recovery quarter, with strong gains in energy and metals. Overall, however, the Bloomberg Commodity Index which tracks a basket of key commodity futures has only managed a small return relative to other markets. The reason being is the drag from agriculture commodities, some of which have been weighed down by ample stocks and reduced demand from consumers in lockdown.

However, as we end what has been a very volatile and at times troubling first-half, driven by the worst pandemic-related slump in global growth since WW2, the outlook for the second-half remains somewhat troubling. The pandemic remains out of control in several regions while the renewed surge across the US and the recent scare in Beijing all highlight the risk this invisible enemy is still posing.

More forward-looking assets like equities, some of which have returned to pre-COVID levels, can look beyond the short-term risks and price in a recovery supported by a wall of money from central banks. Commodities do not have this luxury as they are spot assets which depend on supply and demand. This means that financial investors can control the price for a certain period of time