China Calm Shattered: Probe Sparks Selloff in Stocks

  • Citic Securities leads losses after revealing investigation
  • Industrial profits drop 4.6% in October as slowdown deepens


  • China’s stocks tumbled the most since the depths of a $5 trillion plunge in August as some of the nation’s largest brokerages disclosed regulatory probes, industrial profits fell and two more companies said they’re struggling to repay bonds.

    The Shanghai Composite Index sank 5.5 percent, with a gauge of volatility surging from the lowest level since March. Citic Securities Co. and Guosen Securities Co. plunged by the daily limit in Shanghai after saying they were under investigation for alleged rule violations. Haitong Securities Co., whose shares were suspended from trading, is also being probed. Industrial profits slid 4.6 percent last month, data showed Friday, compared with a 0.1 percent drop in September.

The probe into the finance industry comes as the government widens an anti-corruption campaign and seeks to assign blame for the selloff earlier this year. Authorities are testing the strength of a nascent bull market by lifting a freeze on initial public offerings and scrapping a rule requiring brokerages to hold net-long positions, just as the earliest indicators for November signal a deterioration in economic growth. A Chinese fertilizer maker and a pig iron producer became the latest companies to flag debt troubles after at least six defaults this year.

Brokerages Plunge

“The sharp decline will raise questions whether the authorities’ confidence that we are seeing stability in the Chinese markets may be a tad premature,” said Bernard Aw, a strategist at IG Asia Pte. in Singapore. “The rally since the August collapse was not fundamentally supported. The removal of restrictions for large brokers to sell and the IPO resumptions may not have been announced at an opportune time.”

Friday’s losses pared the Shanghai Composite’s gain since its Aug. 26 low to 17 percent. The Hang Seng China Enterprises Index slid 2.5 percent in Hong Kong. The Hang Seng Index retreated 1.9 percent.

A gauge of financial shares on the CSI 300 slumped 5 percent. Citic Securities and Guosen Securities both dropped 10 percent. Haitong International Securities Group Ltd. slid 7.5 percent for the biggest decline since Aug. 24 in Hong Kong.

The finance crackdown has intensified in recent weeks and ensnared a prominent hedge-fund manager and a CSRC vice chairman. Citic Securities President Cheng Boming is among seven of the company’s executives named by Xinhua News Agency as being under investigation. Brokerage Guotai Junan International Holdings Ltd. said Monday it had lost contact with its chairman, spurring a 12 percent slump in the firm’s shares.

An industrial explosives maker will become the first IPO to be priced since the regulator lifted a five-month freeze on new share sales imposed during the height of the rout. Ten companies will market new shares next week. The final 28 IPOs under the existing online lottery system will probably tie up 3.4 trillion yuan ($532 billion), according to the median of six analyst estimates compiled by Bloomberg.



JB offshore.mp4  The First Rule Is Safety

$20 Oil If OPEC Doesn’t Act : Venezuela

  • Don’t Cry for Me Venezuela
  • It won’t be easy, you’ll think it strange
    When I try to explain how I feel
    That I still need your love after all that I’ve doneI had to let it happen, I had to change
    Couldn’t stay all my life down at heel
    Looking out of the window, staying out of the sun
  • OPEC member seeks `equilibrium price’ of $88 a barrel
  • Saudis, Qatar to consider proposal, Venezuelan minister says

Oil prices may drop to as low as the mid-$20s a barrel unless OPEC takes action to stabilize the market, Venezuelan Oil Minister Eulogio Del Pino said.

Venezuela is urging the Organization of Petroleum Exporting Countries to adopt an “equilibrium price” that covers the cost of new investment in production capacity, Del Pino told reporters Sunday in Tehran. Saudi Arabia and Qatar are considering his country’s proposal for an equilibrium price at $88 a barrel, he said.

OPEC ministers plan to meet on Dec. 4 to assess the producer group’s output policy amid a global supply glut that has pushed down crude prices by 44 percent in the last 12 months. OPEC supplies about 40 percent of the world’s production and has exceeded its official output ceiling of 30 million barrels a day for 17 months as it defends its share of the market. Benchmark Brent crude settled 48 cents higher at $44.66 a barrel in London on Friday.

“We cannot allow that the market continue controlling the price,” Del Pino said. “The principles of OPEC were to act on the price of the crude oil, and we need to go back to the principles of OPEC.”

OPEC ministers will meet informally on Dec. 3 in Vienna, a day before the group’s formal session, he said.

Chesapeake :Downgraded To Junk at Fitch – Further Evidence The Energy Sector Slide Continues


( FROM Seeking Alpha)
Nov 6 2015, 17:45 ET | About: Chesapeake Energy Corporation (CHK) | By: Carl Surran, SA News Editor
Chesapeake Energy’s (NYSE:CHK) debt rating is cut further below investment grade, to BB- from BB, by Fitch Ratings; shares fell 2.6% in today’s trade, in line with other energy producers as crude oil prices fell and amid the higher likelihood of a Fed rate hike.

Fitch says CHK’s cash flow, liquidity and leverage profiles will be “notably weaker” than previous expectations because of persistently low oil and gas price realizations and heightened future reliance on asset sales to fund cash flow gaps; it also cites CHK’s increasingly limited ability to invest in its highest return assets in favor of operationally committed and shorter-cycle reserves.Fitch concedes that CHK’s size and scale relative to other high-yield E&P companies provides considerable financial flexibility.

and from Forbes

This Oil Bust Will Change The Energy Industry Forever

Although demand for oil and gas will continue for decades to come, it will gradually diminish as renewable energy sources rise. A lot could happen between then and now. The International Energy Agency (IEA) and many other credible parties continue to forecast that our growing world population from 7 billion people today to 9 billion by 2050 will need much more energy – in particular as most of these people will aspire a life like we have here in North America. So it is no wonder that Abdalla El-Badri, Secretary General of OPEC has recently said that if producers don’t invest in new oil and gas supply, we could see oil prices as high as $200 a barrel. On the other hand, there is Bob Dudley, CEO of BP , who believes we won’t see $100 oil again “for a long time”.

Innovation in the oil industry, particularly the North American revolution in the hydraulic fracturing of tight oil reservoirs, has changed oil supply dramatically. With smaller, more flexible capital-light projects and shorter lead times, fracking has enabled greater adaptability to volatile market conditions. The outlook for shale oil and gas could be just as strong in many places in the world. Even if the shale boom proves tough to replicate (due to factors such as regional differences in geology, regulation and incentives to land owners), in many cases bringing new technologies to mature fields will help keep supply up and dampen the increase in oil prices.

Sluggish demand is another important factor keeping oil prices from rising. Not just from disappointing growth in China, but also in North America. Car ownership in the Western world has started to drop in the past decade, especially among young people. Based on the early success of Tesla and arrival of car sharing companies like Car2Go and Uber, and the entry of Apple AAPL +0.83% and Google GOOGL +0.13%in the autonomous-driving car game, there’s reason to foresee a future where not everyone has a personally owned internal combustion engine at their disposal. Change is slow however: a truck or bus and many gasoline fueled cars sold today will of course drive somewhere in the world for the next 30 to 40 years. Hence, some demand for hydrocarbons will continue.

The financial sector is a third factor inhibiting the rise of oil prices. While we already see many financial institutions divesting from hydrocarbon stocks to the tune of $2.6 trillionbecause of social and environmental pressure, the recent speech by Bank of England Governor Mark Carney is further going to influence the willingness of large financial institutions to continue to invest in traditional hydrocarbon projects in the future. One of the most significant risks Carney focused on in his speech is transitionary cost, the cost of write-offs for traditional hydrocarbon assets if countries are indeed getting serious about phasing out hydrocarbons. Even while the target date for a 100% carbon free society is only 2100, we expect that policies will likely start having significant implications in the next decades. The message is that “Sustainable Innovation” may become key to future energy financings and that oil and gas companies will have to innovate much more than they do today in order to survive as energy-producing Fortune 500 companies in the decades to come.


Oil Guru Who Called 2014 Rout Sees $ 70 Oil in 2016

  • PIRA sees demand growth at 1.7 million barrels a day in 2016
  • Production from non-OPEC nations including U.S. seen declining

OPEC will probably hold production steady at its meeting next month as the gap between supply and demand for oil closes, according to the analyst who correctly predicted last year’s rout in prices.

“I don’t think they have to do anything,” Gary Ross, founder and chairman of PIRA Energy Group, said in an interview in Singapore on Monday, referring to the Organization of Petroleum Exporting Countries. Global consumption of crude will continue to grow while output from non-OPEC countries will decline next year, helping to bring the market toward equilibrium, he said.

Oil tumbled more than 48 percent last year as U.S. stockpiles and production expanded, creating a global oversupply that the International Energy Agency estimates will persist until at least the middle of 2016. OPEC’s strategy to defend market share has exacerbated the glut as the group, which kept its production target unchanged at 30 million barrels a day at the last meeting in June, exceeded the quota for the past 17 months.

“There has to be a tightening of balances,” said Ross, who last year turned bearish on oil before prices shrank by almost half. While OPEC volumes have increased, both demand and production from outside the group have responded to low prices, he said.

Brent crude for December delivery was unchanged at $49.56 a barrel on the London-based ICE Futures Europe exchange at 12:50 p.m. Singapore time. Prices have decreased 14 percent this year.

$70 Brent

PIRA forecasts demand for crude to grow 1.7 million barrels a day in 2016, compared with 1.9 million a day this year. Output outside OPEC is expected to decline next year by “several hundred thousands of barrels a day,” Ross said. Among the 12 members of OPEC, production is predicted to increase only in Iran and Iraq.

“Total non-OPEC crude and condensate production is forecast to fall below last
year’s levels,” said Ross, predicting that Brent may rise to $70 by the end of 2016. “Supply growth is limited to OPEC, which grows just 500,000 to 600,000 barrels a day.” On average, Iran’s output will rise 300,000 barrels a day and Iraq’s will increase 240,000 barrels a day, compared with a year earlier, he estimated.

OPEC, which supplies about 40 percent of the world’s oil, is scheduled to gather in Vienna on Dec. 4, when Iran will officially notify the group of its plans to boost production by 500,000 barrels a day as soon as international sanctions against the Persian Gulf state are lifted, Oil Minister Bijan Namdar Zanganeh said in an interview with Mehr news agency.


Russian Crude Output Hits Post-Soviet Record

Russian oil production broke a post-Soviet record in October for the fourth time this year as earlier investments boosted output and producers prove resilient to lower crude prices.

Production of crude and gas condensate, which is similar to a light oil, averaged 10.776 million barrels a day during the month, according to data from the Energy Ministry’s CDU-TEK unit. That is an increase of 1.3 percent from a year earlier and up 0.3 percent from the previous month.

“Russian oil production is still reflecting oil prices above $100 a barrel due to long lead times in the investment cycle,” Alexander Nazarov, an oil and gas analyst at Gazprombank JSC, said by e-mail from Moscow. “The reason behind growth this year dates back to 2010-2014, when a number of projects were financed.”

Output has kept growing even as the Organization of Petroleum Exporting Countries chose to defend market share rather than cut output amid a supply glut last year, a decision that sent prices tumbling. Gazprom Neft PJSC and Novatek OJSC are ramping up output at one of the country’s biggest new projects. Russia’s tax policies insulate the industry from swings in oil prices, with the state bearing most of the risk and reward.

The ruble’s slump over the past year, which has tracked weaker crude prices, has made oilfield services, including drilling, cheaper and supported operating margins, Nazarov said.

Russian crude exports rose to 5.42 million barrels a day in October, a 10 percent gain from the previous year and up 1.7 percent from the previous month.

Oil 5 Talking Points – All Point to Lower for Longer ?


Oil’s bounce back from the summer’s lows has the look of a bottoming in crude prices, but some strategists say the shakeout is not over.

“I’m pretty sure we’re going to see a new low. The probabilities are that we see a new low or two or three,” said Jack Bass. Our 2015 results for managed accounts all did well by avoiding oil and natural gas and that continues to be our bias.

The negative factors that have pounded oil prices continue to hang over the market, and the world is still facing oversupply of about 2 million barrels a day. Strategists say the chief wild card that could send oil to new lows is Iran — and uncertainty about when and how fast it can bring crude back to the market.

This past summer, West Texas Intermediate crude futures touched a low near $38 in late August before moving back to $50 per barrel on Oct. 9. Since then, oil has traded in the upper $40s, giving the impression the worst lows of the bear market in crude are over. Brent, the international benchmark, hit a low at around $42 per barrel in August and temporarily rose above $54 in October.

“There was a bout of short covering, and oil was pumped up on geopolitical fears about Russia’s foray into Syria, but the fundamentals never changed. Production is still high all around the world, and the glut is getting worse, especially for diesel fuels,” said John Kilduff of Again Capital.

1. Iran as a catalyst

Major producers continue to pump at high levels, and demand continues to lag. U.S. shale producers have more resilience than expected, and the U.S. is still producing about 9 million barrels a day.

But it’s Iran’s oil production that some analysts say the market may not be pricing correctly. They also say Iran may be making blustery assertions about its oil production that it will not be able to meet.

The U.S. and five other nations agreed in July to lift sanctions against Iran in return for curbs on its nuclear program, and this past Sunday the agreement was formalized based on Iran’s meeting its commitments to the deal.

An Iranian official this week said the country has already secured buyers from Europe and Asia for more than 500,000 barrels a day in new exports once sanctions are lifted. The final assessment by the International Atomic Energy Agency is expected to be completed by Dec. 15.

“If they put that marginal barrel onto the market, there’s going to be a price impact from it. The Saudis have taken a lot of their market share from Europe in the last couple of years,” said Michael Cohen, head of energy commodities research at Barclays. “It’s going to be a fine balance. I wouldn’t be surprised at the end of 2016 if we look back at the end of the last year and be surprised that they put only 400,000 to 500,000 barrels back on the market, not 800,000 to 900,000 barrels.”

Iran has been producing about 2.8 million barrels a day, from a high of 4.2 million barrels, according to Andrew Lipow of Lipow Oil Associates. “It would surprise me to see 500,000 a day come out onto the market within a couple of months,” he said. “The market takes what they say with a grain of salt. We do know that they are going to be exporting the first minute they can.”

It could be the start of Iran’s oil returning to market that sends oil prices back to the lows, said Citigroup’s Morse. He said the oil market could hit bottom late this year or in the first quarter, but he does not expect Tehran to be able to quickly push the volume of new oil that it is promising.

“These shut-in wells have been building pressure. They can surge production beyond what is sustainable, and if they want to show the world they are there, which is highly likely, that is possible,” he said. Morse said he expects Iran could produce 300,000 to 500,000 barrels a day more within a half year of sanctions being lifted.

Iran also has about 40 million barrels of condensates in floating storage. “I just think the market has underestimated how much oil could come back on the market immediately upon having sanctions released,” Lipow said.

2. Inventories bulging

A second thorny issue for the market is buildup of inventories. Last week U.S. government data showed a surge in crude stocks of 7.6 million barrels of oil, but it is also the buildup of refined products that analysts are watching.

Barclays, in a report, said that global refinery runs grew faster than demand by about 57 percent during the second and third quarter. That created a buildup, pushing refined products into storage in offshore tankers.

Refining capacity has been added around the globe. Saudi Arabia, for instance, shipped less crude in August but more refined oil products. According to JODI data, Saudi Arabia exported 1.3 million barrels a day of refined product, compared to 1.1 million barrels the month earlier.

The U.S. has also increased refined-product exports as well and is a net exporter of about 2 million barrels a day. Barclays expects the rate of build in refined products to slow.

“Fundamentally speaking, we remain in an oversupply situation, and refining margins are weak and likely to get weaker, especially in distillates, and the stocks remain at high levels,” said Cohen. “So any sustained price move tot he upside is going to be met by with skepticism by the market and that’s why we continue to maintain our range bound price forecast at least until the third quarter of next year.”

3. U.S. shale gale

A third bearish factor for oil has been, and continues to be, the resilience of the U.S. oil industry. Saudi Arabia and OPEC vowed last fall to continue producing and to allow the market to set prices in an oversupplied world, a factor they were hoping would curb non-OPEC production.

But U.S. production, despite shut-in rigs, has not fallen that much. Analysts had been expecting some companies to lose some funding in bank redeterminations this month, but it seems the industry is doing better than expected, and the impact is relatively minor.

“We think for WTI there’s downside risk for the first quarter based on the fact we think U.S. production may not roll over like people think,” said Cohen. “We need to see prices go lower as a disincentive.”

Analysts now expect the companies facing lending reviews to have a difficult time in the spring after more months of low oil prices. The U.S. industry is made up of so many companies drilling so many unconventional wells that the trigger of falling prices is not an automatic one, since producers are profitable at all different levels.

“High-yield companies are well-hedged through the first quarter, and then their hedges go off, and it’s not clear they have the cash flow to keep drilling,” said Morse.

Cohen said the pressure from a long period of low prices will pinch companies. “U.S. production is likely to be lower,” he said, adding the hit to shale producers will be worse next year after several more quarters. “It will be worse, not just for those that have their borrowing base redetermined.”

4. Biggest producers producing

Russia and Saudi Arabia are the world’s biggest oil producers, and both of them have taken a full-throttle approach to lower prices in an effort to gain or hold share.

Saudi Arabia led OPEC in its plan to use market pricing as a weapon to slow overproduction. When OPEC meets in early December, analysts see little chance of a change in policy.

In fact, rhetoric around that meeting could add downward pressure on prices.

“The Saudis have been adding more to inventories. I don’t really see them backing down from the 10 million-barrels-a-day production level. They continue to be open to a cut if other producers are willing to cut first,” said Cohen. “They’ve taken a very tit-for-tat approach. They want to see a plan and a credible plan before doing anything.”

The strain of low prices is wearing on both Russia and Saudi Arabia. “They (Saudi) can shield the blow by issuing more debt, which they have done,” Cohen said. “The amount of debt they are issuing this year is basically the equivalent of a $10 bump in oil prices.”

Morse said the producers will not be able to sustain production in a low-price environment forever. “Definitely at some point, in the winter of 2016/2017, it looks like the world moves into a net inventory drawdown, helped by U.S. shale, helped by production in Mexico, the North Sea, Oman, Russia … all showing decline rates instead of staying stable,” he said.

5. World demand

Oversupply hit the world market at the same time demand from the emerging world and China was dampened. China reported GDP of 6.9 percent for the third quarter just below last quarter’s 7 percent pace, but worries about Chinese growth and demand have pressured prices.

The World Bank this week said it expects oil prices to remain weak through next year, and it cut its expectations for crude. The World Bank’s quarterly commodity sector report pared its average oil price forecast to $52 per barrel this year from an earlier estimate of $57. It sees an average price of just $51 in 2016.

The Bank said Iran’s return to the market will dent oil prices, but it also noted weak global growth.

“All main-commodity price indices are expected to decline in 2015, mainly owing to ample supply and, in the case of industrial commodities, slowing demand in China and emerging markets,” the Bank said.

Besides overproduction, high inventories and weak demand, Morse said another factor that could weigh on prices are the speculative investors who could slam the oil price once Iran brings oil back onto the market.

He said WTI could average $40 per barrel in the fourth and first quarters, and Brent could average about $44. Barclays expects Brent to average $53 per barrel in the fourth quarter and $63 in 2016 after a recovery in prices in the second half.


November 2014 – How Did We Do On Our Stock Market Forecast ?

JACK A. BASS MANAGED ACCOUNTS – YEAR END UPDATE AND FORECAST  As written – November 2014 – 40 % cash position You Can Judge : Our 2014 Year End Review and Forecast Gold and Precious Metals The largest gains for our … Continue reading

Posted in Asset Protection, Best Tax Haven, Gold, Jack A. Bass Managed Accounts, Jack A.Bass, Offshore Incorporation, Offshore Investing, Portfolio Management, Tax Havens, Tax Jurisdiction, tax secrecy, Tax strategy,Trusts, Wealth Advisor, Wealth management | Tagged , , | Leave a comment | Edit


Iran – Oil sanctions to be lifted in late 2015 or early 2016 – Adding 2 Million Barrels A Day

Iran has said it will offer about 50 energy projects to investors and plans to boost output by about 2 million barrels a day once the deal is in place.

Sanctions against Iran probably will be lifted within the first three months of 2016, after the International Atomic Energy Agency has confirmed the nation has curtailed its nuclear work, diplomats said last month. Once the restrictions are removed, relief is expected to fuel economic growth by lowering barriers to Iran’s oil exports and ending the isolation of its banks.

Iranian Oil

Iran has said it will offer about 50 energy projects to investors and plans to boost output by about 2 million barrels a day once the deal is in place. The Persian Gulf nation, with the world’s fourth-largest oil reserves, pumped 2.8 million barrels a day last month, according to data compiled by Bloomberg.

One nation, Japan, plans to triple its imports of Iranian crude once sanctions are lifted, the Iranian Oil Ministry’s Shana news agency said on Saturday, citing Seyed Mohsen Ghamsari, director of international affairs at National Iranian Oil Co. Japan will increase purchases to 350,000 barrels a day from 110,000 barrels, the agency said.

The U.S. waivers will result in the lifting of sanctions that now restrict or penalize non-U.S. companies for engaging in various economic activities, including buying Iranian oil and dealing with many Iranian banks, the U.S. officials said.

Narrow Categories

But for U.S. companies, sanctions will be eased only for certain narrow categories, the officials said. They said these include the export of civilian passenger aircraft, the import of spare aircraft parts and handicrafts from Iran, and some activities that subsidiaries of U.S. companies can conduct overseas.

In addition, Obama told reporters on Friday that sanctions “related to ballistic missiles, human-rights violations, terrorism — those, we will continue to enforce.”

In another sign of progress, IAEA monitors last week ended their 12-year investigation into the possible military dimensions of Iran’s nuclear past. Inspectors now have until Dec. 15 to draft and present a final assessment of their inquiry.

Iran’s nuclear work has been the focus of international scrutiny since February 2003, when Iranian officials told inspectors visiting Tehran of their plans to begin enriching uranium on an industrial scale. Subsequent discoveries that Iran had secretly procured nuclear materials and technologies led to years of mistrust. In May 2008 and again inNovember 2011, the IAEA publicly disclosed its suspicions about Iran’s activities.

Iran has consistently denied ever seeking a nuclear weapon.

Timeline to lifting sanctions:

  • Sunday — “Adoption Day” for July accord signed with world powers. Parties to the agreement begin meeting their commitments.
  • Nov. 30 — Iran prepares to end testing of advanced centrifuge cascades and store machines under IAEA seal.
  • Dec. 15 — IAEA to present its assessment of Iran’s past nuclear activities, which board will use “with a view to closing the issue.”
  • Late 2015-early 2016 — Oil sanctions to be lifted on “Implementation Day.” U.S. officials have suggested it will take at least two months from “Adoption Day” to reach this point.

    Saudi Arabia, the world’s largest oil exporter, is storing record amounts of crude in its quest to maintain market share as it cut shipments.

    Commercial crude stockpiles in August rose to 326.6 million barrels, the highest since at least 2002, from 320.2 million barrels in July, according to data posted on the website of the Riyadh-based Joint Organisations Data Initiative. Exports dropped to 7 million barrels a day from 7.28 million.

    “The fall in Saudi crude exports reflects the market reality,” Mohammed Ramady, an independent London-based analyst, said Sunday by phone. “It’s normal to see this fall knowing that the market is becoming highly competitive, with many countries in OPEC selling at discounts and under-pricing the Saudi crude.”

    Crude inventories have been at record highs since May, a month before Saudi Arabia’s production hit an all-time high of 10.56 million barrels a day. The nation has led the Organization of Petroleum Exporting Countries in boosting production to defend market share, abandoning its previous role of cutting output to boost prices.

Reduce your taxes by going offshore

Commodity Collapse Has More to Go – ” long winter’ for prices lasting years

  • Morgan Stanley sees `long winter’ for prices lasting years

  • Open interest posts fourth straight monthly drop in September

Even with commodities mired in the worst slump in a generation, Goldman Sachs Group Inc., Morgan Stanley and Citigroup Inc. are warning bulls that prices may stay lower for years.

Crude oil and copper are unlikely to rebound because of excess supplies, Goldman predicts, and Morgan Stanley forecasts that weaker currencies in producing countries will encourage robust output of raw materials sold for dollars, even during bear markets. Citigroup says the sluggish world economy makes it “hard to argue” that most prices have already bottomed.

The Bloomberg Commodity Index on Sept. 30 capped its worst quarterly loss since the depths of the recession in 2008. The economy in China, the biggest consumer of grains, energy and metals, is expanding at the slowest pace in two decades just as producers struggle to ease surpluses. Alcoa Inc., once a symbol of American industrial might, plans to split itself in two, while Chesapeake Energy Corp. cut its workforce by 15 percent. Caterpillar Inc. may shed 10,000 jobs as demand slows for mining and energy equipment.


“It would take a brave soul to wade in with both feet into commodities,” Brian Barish, who helps oversee about $12.5 billion at Denver-based Cambiar Investors LLC. “There is far more capacity coming on than there is demand physically. And the only way that you fix the problem is to basically shut capacity in, and you do that by starving commodity producers for capital.”

Investors are already bailing.

Open interest in raw materials, which measures holdings of futures and options, fell for a fourth month in September, the longest streak since 2008, government data show. U.S. exchange-traded products tracking metals, energy and agriculture saw net withdrawals of $467.8 million for the month, according to data compiled by Bloomberg.

The Bloomberg Commodity Index, a measure of returns for 22 components, is poised for a fifth straight annual loss, the longest slide since the data begins in 1991. It’s a reversal from the previous decade, when booming growth across Asia fueled a synchronized surge in prices, dubbed the commodity super cycle. Farmers, miners and oil drillers expanded supplies, encouraged by prices that were at record highs in 2008. Now, that output is coming to the market just as global growth is slowing.

Over-investment in new supplies in the past decade and favorable growing conditions for crops caused gluts, Citigroup analysts led by Ed Morse, the global head of commodities research, said in a report Sept. 11. The bank is bearish on crude oil, aluminum, platinum, iron ore, cocoa and wheat in the next three to six months.

Investors need to brace for a “long winter,” with the commodities bear market predicted to last for many years and oil dropping to as low as $35 a barrel, said Ruchir Sharma, who helps manage $25 billion as the head of emerging markets at Morgan Stanley Investment Management in New York. Crude futures traded Tuesday at $46.19, down from about $90 a year earlier.

Goldman Sachs has an even dimmer outlook.

The odds are increasing that oil will slump near $20 because the market is more oversupplied than initially forecast, analysts led by Jeffrey Currie, the head of commodities research, said in a Sept. 11 report. Currie, in an interview days later, said prices could stay low for the next 15 years. The bank also forecasts that copper will remain in surplus through at least 2019 and fall 13 percent to $4,500 a metric ton by the end of next year.

Still, future production isn’t assured. Miners are already scaling back on spending, and extreme weather can cause surprise reductions in farm output.

Rice, one of only a handful of commodities to rise this year, gained 14 percent as a record-wet May in Texas and above-average temperatures in July in other growing states eroded U.S. yield prospects. Companies from Glencore Plc to Freeport-McMoran Inc. are cutting metal output, and Royal Dutch Shell Plc announced it would abandon its drilling campaign in U.S. Arctic waters after spending $7 billion.

“Once you get to a certain price, you’re going to lose a lot of the players,” said Karyn Cavanaugh, a senior market strategist at Windsor, Connecticut-based Voya Investment Management, which oversees $205 billion. “And at that point then, prices will go up.”

Even if demand rebounds, there are still a lot of excess inventories to work through.

U.S. crude-oil stockpiles remain almost 100 million barrels above the five-year average. Copper inventories tracked by the London Metal Exchange have more than doubled in the past 12 months, and the International Grains Council sees wheat reserves climbing to a record next year.

Investors are punishing producers. Glencore has lost about 60 percent in market value this year, and credit markets already view its debt as junk. Seven of the 10 worst performers in the Standard & Poor’s 500 Index this year are commodities-related businesses.

In the case of Caterpillar, the world’s most valuable machinery producer, share prices slumped 23 percent last quarter, as the company struggled to cope with the ripple effects of the slump in oil. The Peoria, Illinois-based company is cutting as much as 9 percent of its workforce through 2018 to lower costs.

“The global infrastructure and supply of commodities still needs to be re-balanced, and it will probably take a couple more years to resolve itself,” said Jack Bass, chief strategist for Jack A. Bass and Associates, Vancouver, Canada.

Read more abour protecting your assets at