Commodites Shone in 2009, Will the Trend Keep in 2010?

The commodity sector performed very well in 2009 with the Reuters/ Jefferies CRB Index rising +23% on annual basis. Central banks worldwide reduced policy rates to record low levels and implemented stimulus programs to combat the worst recession since WWII. While it's yet to say the world has exited recession, improvements in economic data have showed that recovery is underway.



Crude Oil

Geopolitical tension, inventory decline, cold weather and strong macro data firmed oil price in the last week of 2009 and paved the way for a good start in 2010. The February contract touched 80 and closed at 79.36 Thursday, up 1.7% on weekly basis. Crude oil experienced a volatile 2009 with price diving to as low as 32.7 in January and then rallying to 82 in October. The annual gain of 78% has marked the best performance since 1999. Both industry-specific and macro data were supportive for crude oil last week. Crude inventory drew -1.54 mmb to 326 mmb in the week ended December 25. This 4th-consecutive weekly decline has brought the stockpile to the lowest level since January. Distillate stockpile also dipped for the 3rd week, by -2.06 mmb, to 159.3 mmb while gasoline stockpile drew -0.37 mmb to 216 mmb.

Economic indicators released over the week indicated recovery is underway. Initial jobless claims dropped to 432K, the lowest level since 2008, (consensus: 455 K) in the week ended December 26 from 452K in the prior week. Moreover, continuing claims also slid -57K. On manufacturing and sentiment fronts, Chicago PMI rose to 60 in December from 56.1 a month ago while consumer confidence improved to 52.9 from 49.5. The data fueled optimism about US' growth in 2010.....Read the entire article on crude oil, natural gas and precious metals.

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