Why Energy Has Been Outperforming The Rest Of The Commodity Complex This Year

Energy-related commodities have been crushing rivals in the raw materials space lately, the EIA notes today, citing Goldman's commodity index.

Here's the chart — energy is up 8.1% since July 1, while non-energy is off -1.5%.

The EIA chalks up the divergence to the huge gains in WTI we saw in July. WTI comprises about a third of the energy component of Goldman's index, and the contract is up 5.2% since July 1. New infrastructure recently came online that eased the supply glut in Cushing, Okla, driving WTI prices up. Turmoil in Libya also pushed energy prices higher.

Meanwhile, wheat and corn are off -3.5% and -12.1% respectively over the same period, and slight gains in metals have not been enough to offset declines in the rest of the non-energy component.

EIA says the divergence shows energy has decoupled from macro trends:

This divergence suggests that the recent increases in crude oil and petroleum product prices are most likely not because of changes in expectations for future global economic growth, which would tend to increase all commodity prices. Instead, these increases can likely be attributed to factors specific to petroleum markets, including recent geopolitical developments such as reduced production in Libya.

The agency also notes that since May, WTI contracts have outnumbered those in London-traded Brent by 1.5 million.