Commodities fall as Goldman calls time on the bull run

Traders were caught off guard last night after one of Wall Street's best-known commodity bulls advised clients to take profits in oil, copper and other key resources.

Goldman Sachs – the investment bank which first recommended that clients invest in crude oil, copper, cotton, soya bean and platinum in December – switched its stance, warning that the short-term risks of investing in that basket now outweighed the rewards.

The reversal comes on the heels of heady gains across the commodity markets. Oil prices in particular have climbed higher against the backdrop of turmoil in the Middle East and North Africa. Brent crude prices, for instance, rose just above $127 per barrel on Monday, booking a new two-year record.

But Goldman analysts warned that, at current levels, prices were threatening demand. The bank also highlighted signs of increased speculative interest in the oil market, something that was evident in recent figures from the US Commodity Futures Trading Commission, which said net long positions held by financial traders in US crude oil contracts were running close to record levels. In a separate note to clients, the bank's chief energy analyst, David Greely, said the market was likely to "experience a substantial correction", taking Brent prices down to $105 in coming months.

Concerns about global demand were echoed by the International Energy Agency, which said preliminary data for January and February suggested that the rise was "already starting to dent demand growth".

In its latest monthly report, the agency warned that, with few expecting the Opec oil cartel to arrive at a formal decision to lower prices by increasing production, the oil market faced a "less palatable route to price moderation", "namely economic slowdown and weaker demand growth".

The warnings triggered weakness across the commodity markets, with Goldman also striking a cautious note on copper, where it closed the long position first recommended in October, and platinum. On the New York Mercantile Exchange, US crude oil futures for May delivery fell to $105.91, down about $4, at one point, while in London, Brent shed more than $3 to ease below $121 per barrel in mid-afternoon trading.

"We still see significant upside in soya bean prices, but believe that copper and platinum will face near-term headwinds as higher oil prices potentially translate into a negative demand shock for the metals and as these commodities are exposed to supply chain problems resulting from the earthquake in Japan," the bank said. "This is particularly the case for platinum, given its large exposure to global automobile production."

In the case of copper, which struck record highs of $10,000 per tonne in early February, Goldman said the rally was at risk as "high prices and tight credit motivate tight inventory management from key consumer China".

Hit by the concerns, benchmark copper prices on the London Metal Exchange were 1 per cent lower at under $9,800 per tonne in the afternoon. Platinum prices were also lower, with the London mid-afternoon fix coming in at $1,785 per troy ounce, against a previous fix of $1,790.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Attenborough with the primates
tvWhy BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
News
people
News
Campbell: ‘Sometimes you have to be economical with the truth’
newsFormer spin doctor says MPs should study tactics of leading sports figures like José Mourinho
News
news
ebooks
ebooksA special investigation by Andy McSmith
Voices
Lance Corporal Joshua Leakey VC
voicesBeware of imitations, but the words of the soldier awarded the Victoria Cross were the real thing, says DJ Taylor
Life and Style
Alexander McQueen's AW 2009/10 collection during Paris Fashion Week
fashionMeet the collaborators who helped create the late designer’s notorious spectacles
Sport
football
News
i100
News
Perry says: 'Psychiatrists give help because they need help. You would not be working in mental health if you didn't have a curiosity about how the mind works.'
people
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
Yvette Cooper: We can't lose the election. There's too much on the line

Yvette Cooper: We can't lose the election. There's too much on the line

The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

It's not easy being Green

After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

Gorillas nearly missed

BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

The Downton Abbey effect

Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
China's wild panda numbers have increased by 17% since 2003, new census reveals

China's wild panda numbers on the up

New census reveals 17% since 2003
Barbara Woodward: Britain's first female ambassador to China intends to forge strong links with the growing economic superpower

Our woman in Beijing builds a new relationship

Britain's first female ambassador to China intends to forge strong links with growing economic power
Courage is rare. True humility is even rarer. But the only British soldier to be awarded the Victoria Cross in Afghanistan has both

Courage is rare. True humility is even rarer

Beware of imitations, but the words of the soldier awarded the Victoria Cross were the real thing, says DJ Taylor
Alexander McQueen: The catwalk was a stage for the designer's astonishing and troubling vision

Alexander McQueen's astonishing vision

Ahead of a major retrospective, Alexander Fury talks to the collaborators who helped create the late designer's notorious spectacle
New BBC series savours half a century of food in Britain, from Vesta curries to nouvelle cuisine

Dinner through the decades

A new BBC series challenged Brandon Robshaw and his family to eat their way from the 1950s to the 1990s
Philippa Perry interview: The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course

Philippa Perry interview

The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course
Bill Granger recipes: Our chef recreates the exoticism of the Indonesian stir-fry

Bill Granger's Indonesian stir-fry recipes

Our chef was inspired by the south-east Asian cuisine he encountered as a teenager
Chelsea vs Tottenham: Harry Kane was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope

Harry Kane interview

The striker was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope
The Last Word: For the good of the game: why on earth don’t we leave Fifa?

Michael Calvin's Last Word

For the good of the game: why on earth don’t we leave Fifa?
HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?