ML-Implode News - Hedge Fund Bets Signal There's More Pain Ahead for Commodities

Money managers increased their combined net-bearish position across 18 raw materials to the biggest ever, doubling the negative bets in just two weeks. A measure of returns on commodities last week slid to the lowest in at least 25 years. Metals, crops and energy futures all slumped amid supply gluts and an anemic outlook for the global economy.
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Excess supplies are the main driver for the bear markets across commodities, Goldman analysts led by Jeffrey Currie said in a report on Jan. 15. Prices will likely have to fall further to spur the production cuts needed to end gluts, but markets will start to rebound later in the year, creating "the birth of a new bull market," the analysts said.
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With plunging prices taking a toll on commodity producers, more significant supply cuts may not be far off. BHP Billiton Ltd. said last week it expects to take a writedown of $4.9 billion on the value of its U.S. shale assets due to the tumble in oil prices. Shares of Freeport-McMoRan Inc., the biggest publicly traded copper producer, are approaching a record low, and analysts at firms including BB&T Capital Markets predict the company will probably need to step up its asset sales to bolster its balance sheet. Explorers have idled more than 150 drilling rigs in U.S. oilfields since August, according to Baker Hughes Inc.
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"The fact is there's no major fiscal stimulus to ignite global growth," Holmes said. "Everyone is extremely bearish."

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Hedge Fund Bets Signal There's More Pain Ahead for Commodities