Sentiment was polarised on commodities at the start of 2008. Bulls such as Barclays Capital pointed to fresh lows in metal stockpiles as a reason to be bullish on industrial raw materials, but others focused on the risks of a dramatic slowdown in the world economy; this would imply a “meaningful impact on commodity demand”, said Derek Burleton of Dominion Bank. In the end, both sides proved correct.
For the first six months, bulls were in the ascendant and the end of June marked their high point: oil touched a record of $147/barrel, copper reached $8,900/tonne and the Reuters/Jefferies CRB index peaked at 473. Analysts rushed to raise forecasts; Edward Morse of Lehman Brothers looked like an uberbear for forecasting $93/barrel for 2009. Then the market turned overnight. By October, Breakingviews’s Hugo Dixon was writing that “commodities have fallen off a cliff as China has started to ‘recouple’ with weak Western economies”, made worse as “the great deleveraging” forced speculators to bail out, said The Economist. By mid-December, oil was down 75% at under $40/barrel, while the CRB had fallen 50%.