Commodities ended lower on Friday, retreating after a brief rebound from the previous session's plunge, and analysts said more market turbulence was in store after the steepest weekly decline since 2008. US crude oil bounced up early, but ultimately fell almost 3 percent on the day and 15 percent on the week.
In dollar terms, oil posted its steepest weekly drop, $16 a barrel. Markets like corn and sugar also gave up early gains and finished lower. The Reuters-Jefferies CRB index finished the week with a 9 percent drop. It was the biggest weekly decline since December 2008 for the CRB, which tracks 19 commodities and acts as a global benchmark for the asset class. For traders watching price screens turn red in New York and Chicago, it was another surprising session, though not as shocking as Thursday's free-fall which lacked an obvious trigger.
"After yesterday's kind of historic trading day, the market's going to have increased price volatility which can lead to this kind of intraday swing, so we have to watch it," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut. Most market strategists repeated their mantra of higher commodity prices over the long term, saying this week's sell-off had changed nothing fundamentally. Yet some warned of more market swings in the days and weeks ahead.
From June 2010 to the end of April 2011, the CRB rose 45 percent. That was a bigger increase than the 30 percent CRB rise at the peak of the commodities boom between the end of 2007 and mid-2008. The latest surge was due to loose US monetary policy; burgeoning demand from China, India and other developing economies; and supply scares in oil, corn and other commodities.
The bullish charge came to a sudden halt this week as the herd mentality reversed direction. On Thursday, the CRB fell 5 percent, a decline exceeded only four times before, three of those in the midst of the 2008 crisis. Silver plummeted almost 30 percent for the week, the steepest plunge of any commodity and almost twice as steep as oil's tumble.