EIA: GSCI energy, non-energy components diverge in returns

According to the US Energy Information Administration’s Market Price Uncertainty Report, the energy component of the Goldman Sachs Commodity Index (GSCI)—a benchmark for changes in commodity markets over time—rose 8.1% since July 1. In contrast, the non-energy component of the index declined by 1.5%, suggesting that the recent increase in energy commodity returns are not likely because of improved global economic growth expectations but energy market-specific factors such as a drop in oil production from Libya due to ongoing protests.

The upward movement in the energy index also has been attributed substantially to the rise of the West Texas Intermediate over the last month, accompanied by higher trading volumes for WTI futures contracts on the New York Mercantile Exchange.

The NYMEX futures price for WTI crude accounts for more than one third of the weighting in the energy component of the GSCI and about 25% of the entire GSCI. The total monthly trading volume for WTI has outpaced Brent trading volumes over the past 3 months, averaging 1.5 million more total contracts traded.

Non-energy commodity prices have declined this year. Copper, gold, and corn, with a combined share of 11% of the S&P GSCI, are down 11%, 22%, and 33%, respectively, since the start of 2013. “The declines can be attributed to factors such as slower-than-expected growth in emerging market countries as well as market-specific explanations such as improved weather that led to higher corn crop yields,” EIA said.

The GSCI represents the price of a broad spectrum of commodities and is used as a benchmark for changes in commodity markets over time. Commodity product classes represented within the index include energy, industrial metals, precious metals, agriculture, and livestock. Energy accounts for almost 70% of the index, with crude oil alone comprising about 47%. GSCI price levels were first published in 1991, and a related futures contract is currently traded on the Chicago Mercantile Exchange.

Contact Conglin Xu at conglinx@ogjonline.com.

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