Commodity Rally Update – July 13, 2021

One of the most significant news stories in the past week was the OPEC meeting late last week. OPEC members Saudi Arabia and the United Arab Emirates were unable to agree after the UAE partially objected to the new proposed production agreement. There are currently no plans for OPEC to reconvene and resume negotiations in the near future but we will continue to be vigilant for any signs of a deal.  

This recent commodity rally has been one of the strongest rallies following a global recovery. Although it has recently lost momentum, it remains the strongest to date.

As we speculated previously commodities appear to be approaching a period of range trading. The observed sideways movement of median commodity spot index returns is anticipated due to the historical precedent but we will continue to see if that continues to be the case.

The commodity rally continues to lose steam as only 71% of commodities have a positive 3-month rolling return and 42% of commodities have a positive 1-month rolling return. Two weeks ago these values were at 80% and 52% respectively. 


The 3-month rolling correlation sits at 47.5% down from a recent peak of ~65%, this is the first time the trend dips below 50% since early May. The 1-month rolling correlation remains steady at around 43%.

While most commodities have seen a spectacular year of gains, the past month has been more dispersed. Lumber has continued to tumble downward, a breath of fresh air for consumers. Notably natural gas has seen consistent gains as demand has increased due to numerous macroeconomic conditions and is likely to remain elevated. WTI crude oil also continues to climb as the financial community patiently awaits a resolution after OPEC talks have seemingly stalled with Saudi Arabia and the UAE unable to agree. 

Net positioning by managed money continues to slide downward from a recent peak. Will the commodity rally continue to climb? Managed money does not seem to think so.


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