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OPEC deal lifts more than oil, drives gains across commodities

The logo of the Organization of the Petroleum Exporting Countries (OPEC) is pictured at its headquarters in Vienna, Austria, May 30, 2016. REUTERS/Heinz-Peter Bader

 

Bloomberg

OPEC’s surprise deal to reduce crude production isn’t only supporting oil prices, it’s helping drive gains across commodities and the companies that produce them.
The Bloomberg Commodity Index, a measure of returns from 22 raw materials, extended gains after the biggest jump in almost three weeks on Wednesday, when OPEC agreed to cut output for the first time in eight years. The news of the accord weighed on the dollar, increasing the appeal of assets such as copper that are priced in the U.S. currency.
Energy companies led gains in the Stoxx Europe 600 Index, with the 20-member oil and gas sub-index jumping as much as 4.9 percent, the most since February. The Bloomberg World Mining Index climbed for a second day. Copper in London rose as much as 0.9 percent, while soybeans in Chicago gained 1.2 percent.
“Risky assets including equities of energy companies and commodities in general are all surging today as investors pick these with oil prices jumping overnight following the OPEC pact,” said Hong Sung Ki, senior analyst at Samsung Futures Inc. said by phone from Seoul. “But uncertainties remain on whether the prices are sustainable as we still have some way to go for OPEC’s November meeting and a lot has still been undecided.”
Royal Dutch Shell Plc and Total SA, Europe’s largest oil companies by market value, jumped more than 5 percent in London trading, their biggest gains since February. BHP Billiton Plc climbed as much as 6 percent and Glencore Plc advanced 4.3 percent.
While Goldman Sachs Group Inc. is skeptical about the OPEC deal implementation, the bank said it could add as much as $10 a barrel to oil prices. Brent crude was 41 cents lower at $48.28 a barrel on the ICE Futures Europe exchange at 10:49 a.m. in London. The contract increased $2.72, or 5.9 percent, to $48.69 a barrel on Wednesday, the biggest gain in more than five months.
The Bloomberg Dollar Spot Index, meanwhile, is holding losses after tumbling Wednesday for a third session amid low or negative interest rates by central banks worldwide. The LME index of six industrial metals is heading for a third straight quarterly gain for the first time since 2011. Tin touched the highest price since Jan. 12, 2015, gaining as much as 0.8 percent, while lead advanced as much as 1.3 percent as metals increased in London and Shanghai.

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