Why are the prices of so many commodities rising in an economy that seems to remain quite weak?

% change butter35 coffee21.8 cocoa20.2 copper89.1 corn-8.3 cotton38.6 gold32.1 hogs2.7 oats13.4 oil63.2 lead81.9 palladium75.9 platinum61.7 silver59.1 steel-0.9 sugar73.6 tin22.5 wheat-26.6 zinc55.4 average37.4 euro12

The table at the right summarizes the percent change between January 6 and November 11 in the cash prices of 19 commodities reported in the Wall Street Journal (downloaded via Webstract). The average commodity in this list has appreciated 37% since the start of the year.

A recent paper by Ke Tang and Wei Xiong documents an increasing tendency for commodity prices to move together over the last few years. A decade ago, what happened to oil prices was largely unrelated to movements in most other commodity prices. The graphs below show how the correlations between oil prices and

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OUTLOOK The improving economic scene, both here in the U.S. as well as worldwide, is the main driver of the current oil rally that has seen the commodity settling around the $80 per barrel level. But high levels of product inventories (particularly gasoline), along with still higher supplies, will limit any sustained crude gains, in our view. But way too many factors weigh on oil prices, from OPEC decisions and geostrategic tensions to the value of the U.S. dollar and seasonal variables, to definitively size up each one of them for their respective impact on prices.  In its latest release, the Energy Information Administration (EIA) reported a less-than-anticipated increase in crude stockpiles, which rose by 800,000 barrels for the week ending October 23. However, current crude oil stocks, at 339.9 million barrels, still remain 9% above the year-earlier level as well as above the upper limit ...

Recently, the federal government’s Energy Information Administration (EIA) issued an overall bullish report, showing a smaller-than-expected build in crude stockpiles. Further, the data showed that gasoline inventories were down as predicted, while distillate stocks also declined, though fell short of expectations. In its release, the agency said that crude inventories rose by 1.3 million barrels for the week ending October 16, much lower than analysts' expectations. This is the second successive week in which the crude buildup has been lower than originally anticipated. A major contributing factor to the modest increase can be attributed to a fall in crude oil imports, which dropped to the lowest level in two months. Current crude oil stocks, at 339.1 million barrels, are 8.9% above the year-earlier level and remain above the upper limit of the average for this time of the year (depicted in the first EIA chart below). The ...

Yesterday, the U.S. Energy Department's weekly inventory release showed a less-than-expected build in crude stockpiles. However, the headline news was centered on a sharp drop in gasoline stocks and refinery utilization that pushed oil prices to a fresh 2009 peak and lifted energy stocks. The federal government’s Energy Information Administration (EIA) reported a 400,000 barrels rise in crude inventories for the week ending October 9, much less than analyst expectations. The modest increase can be attributed to scaled back operations by the refiners (prompted by weak profit margins) even as imports fell. This follows last week’s report, which showed an unexpected rise in oil supply figures, against consensus forecast of a buildup. Current crude oil stocks, at 337.8 million barrels, are 9.6% above the year-earlier level and remain above the upper limit of the average for this time of the year (depicted in the first EIA chart ...

Yesterday, we got a bullish report from the federal government’s Energy Information Administration (EIA), showing a surprise decline in crude stockpiles. However, the data also showed a buildup in gasoline and distillate inventories, thereby somewhat neutralizing the positive impact. In its weekly release, the agency reported a much bigger-than-expected 5.9 million barrels drop in crude inventories for the week ending September 4, as imports fell and refiners raised demand. This follows last week’s release, which also reported crude drawdown but were below expectations. Current crude oil stocks, at 337.5 million barrels, are 13.3% above the year-earlier level and remain above the upper limit of the average for this time of the year (depicted in the first EIA chart below). The supply cover decreased from 23.6 days in the previous week to 22.9 days of supply, but it remains above the year-earlier level of 20.3 days.  ...

Yesterday, the federal government’s Energy Information Administration (EIA) reported mixed inventory data. The crude drawdown was below expectations and distillate stocks were up more than anticipated. On the positive side, gasoline supplies dropped steeply and total U.S. oil demand over the last four-week period turned positive after a long time. In its weekly release, the agency reported a lower-than-expected 372,000 barrels drop in crude oil stockpiles for the week ending August 28, as a jump in imports offset a rise in petroleum demand. This follows last week’s report, which showed an unexpected rise in oil supply figures, missing estimates of a drop. Current crude oil stocks, at 343.4 million barrels, are 13.0% above the year-earlier level and remain above the upper limit of the average for this time of the year (depicted in the first EIA chart below). The supply cover decreased marginally from 23.8 days in ...

Yesterday, we got a bearish report from the Energy Information Administration (EIA), with crude oil stockpiles showing an unexpected rise. In its weekly release, the agency said that crude inventories rose 128,000 barrels from the preceding week, far off estimates that hoped for another drawdown, following last week’s encouraging data. Major contributing factors to the inventory buildup were a rise in domestic production and crude oil imports. Current crude oil stocks, at 343.8 million barrels, are 12.4% above the year-earlier level and remain above the upper limit of the average for this time of the year (depicted in the first EIA chart below). The supply cover increased marginally from 23.7 days in the previous week to 23.8 days of supply and remains significantly above the year-earlier level of 20.5 days. Gasoline stocks were down 1.7 million week over week, better than expectations ...

In the energy market on Wednesday, crude for August delivery sank, closing at $68.67/barrel, down 57 cents. July reformulated gasoline lost 5 cents, to $1.843/gallon.

In its weekly inventory report, the Energy Information Administration said that crude stockpiles fell 3.8 million barrels in the week ended June 19. That was three times analysts’ expectations for a decline of only 1.2 million barrels.

Gasoline supplies went in the other direction, increasing by 3.9 million barrels last week, while distillates rose by 2.1 million barrels. Refineries were operating at 87.1% of capacity, up from 85.9% the previous week, and the highest level since early December.

While the supply data was “mixed,” said Tariq Zahir, managing member at Tyche Capital Advisors, “we do feel both the crude and gasoline markets could see a downward correction in the next few weeks as demand is looking weak.”

But since “crude-oil stocks went down as much as gasoline

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In line with the trend in recent weeks, we got another largely positive report from the Energy Information Administration (EIA), with crude oil stockpiles maintaining their recent downtrend. Crude oil's weakness today appears to be due to the greater-than-expected growth in gasoline stockpiles, largely due to increased imports.Given growing concerns about the impact that the recent increase in gasoline prices may have on the emerging economic recovery, the stalling or reversal of gasoline's price momentum can only be termed positive, in our view. We have all along been for a pause in crude oil's impressive rally to consolidate recent gains and ensure its long-term sustainability.We continue to favor early-cycle leverage through the oilfield service names, such as Weatherford (WFT) and Baker Hughes (BHI). We continue to like deepwater drillers such as Diamond Offshore (DO) and Transocean (RIG).In its weekly ...

A bigger-than-expected drop in crude oil inventories and the seasonal uptick in gasoline demand is helping sustain the spectacular rally in crude oil prices that has pushed the commodity to a new high for the year.While an improving economic outlook and favorable currency moves account for the bulk of the commodity's gains, recent moves on the inventory front have also been helpful. Crude oil stockpiles, still at multi-year highs, have been steadily coming down over the last few weeks. Including today's report from the Energy Information Administration (EIA), crude oil inventories have dropped in four of the last five weeks.We continue to believe that there are good fundamental underpinnings for the ongoing oil rally. We continue to favor early-cycle leverage through oilfield service names, such as Weatherford (WFT) and Ensco (ESV). Our long-term favorites remain Exxon (XOM), Schlumberger (SLB) and Diamond ...