Prices for energy commodities fell more than any other class in 2014 as oil prices plunged in the last four months of the year, according to the federal United States Energy Information Administration.
Commodities groups usually track each other, though specific trends in one market could cause a deviation. The EIA said that’s what happened with the energy portion of the S&P Goldman Sachs Commodity Index, which dropped 43 percent year through the year. That’s a steeper decline than the respective 6 percent, 8 percent and 8 percent drop for precious metals, industrial metals and grains.
A bulk of the fall is attributed to plummeting prices for oil — two-thirds of the index’s energy component are comprised of Brent crude, an international benchmark, and West Texas Intermediate, a U.S. benchmark. Brent has dropped from more than $100 per barrel in July to below $60 per barrel, a price that had not been seen in more than five years. WTI crude has fallen to nearly $50 per barrel.
Prices are weakening because of a global oversupply, which is largely a result of surging U.S. shale oil output and a decision by the Organization of Petroleum Exporting Countries to maintain production levels instead of cutting them to buoy prices. Softer than anticipated global demand also has contributed to the glut.
“At the end of June, with elevated risk for supply disruptions in Iraq, the S&P GSCI energy index rose to its highest point of the year, reaching 10% above starting levels. In the second half of the year, higher, sustained increases in crude oil supply and lower expected global economic growth in 2014 and 2015 contributed to a rapid decline in crude oil prices, causing the prolonged decline in the index,” the EIA said.
The value for natural gas, which accounts for 4 percent of the index’s energy category, also fell by one-third. That was the lowest price decline of the energy commodities measured.
