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New Olympic event: the commodity toss Add to ...

Here's an interesting theory about why commodity prices, and the price of crude oil in particular, have been declining over the past month: China played host to the Olympic games, which necessitated relaxing some of its manufacturing might. Now that the games are over, get ready for some flexing.

"China is either a major producer or consumer of aluminum, copper, lead, zinc and nickel as well as the second largest user of crude oil in the world," Bob Tebbutt, vice-president of risk management at Peregrine Financial, said in a note. "It is no wonder that commodities fell sharply as the country slowed its industry to focus on producing a successful games."

Chinese authorities put clean air over economic growth - demonstrating one of the upsides to having an authoritarian regime hosting the games - and shut down most manufacturing within a 50-mile radius of the games and reduced energy use across the country. With lower energy use, demand for commodities dried up, Mr. Tebbutt argued.

He believes that trend should reverse itself, noting that copper has already begun to rebound and energy prices should follow. That means the U.S. dollar could be headed back down after a period of strength.

 

 

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