COMMODITIES-Index rebalance to boost Brent by $3 bln, gold $1 bln

Wed Jan 8, 2014 7:09pm GMT

* $12.4 bln to be moved around in SPGSCI, DJ-UBS rebalancing
    * Brent to see $2.7 bln in new buying; WTI to lose $2.8 bln
    * Gold to get $1.1 bln more; natgas $1.4 bln less
    * Reweightings to start Wed and occur over 5-business day
cycle

    By Barani Krishnan
    NEW YORK, Jan 8 (Reuters) - Brent crude oil will see nearly
$3 billion in fresh buying and gold more than $1 billion from
the annual rebalancing of the world's two largest commodity
indexes beginning Wednesday, a spokesperson for the indexes
said.
    Allocations toward U.S. crude oil will fall almost $3
billion while natural gas takes a cut of nearly $1.5 billion
under the changes to occur over five business days at the
Standard & Poors Goldman Sachs Commodity Index and
the Dow Jones-UBS Commodity Index.
    The rebalancing of the two indexes, which have an estimated
$155 billion in all tracking them and are run by S&P Dow Jones
Indices, is a yearly ritual meant to add or trim allocations to
commodities based on global production and liquidity data.
    "Approximately $12.4 billion is set to move over (in) the
2014 rebalancing period starting today," Jodie Gunzberg, vice
president for commodity indices at S&P Dow Jones Indices, said
in an email.
    Gunzberg said Brent will see nearly $2.7 billion in
additional index buying from the rebalancing while U.S. oil's
West Texas Intermediate (WTI) crude will lose about $2.8
billion.
    The projections are based on numbers compiled in December,
2012. Estimated allocations could change based on whether
investors add money to commodity funds or pull money out.
    Brent, which closed flat in 2013, will see a cumulative rise
of 1.7 percent in the SPGSCI and DJ-UBS weightings for 2014.
Brent prices have fallen nearly 3 percent since the
start of this year, and were up a modest 0.2 percent at $107.57
a barrel in Wednesday's trading.
    WTI, which closed up 7 percent last year, will have a 1.8
percent cut in the new weightings of the two indexes. WTI prices
 have fallen nearly 6 percent since the start of the year,
losing 0.8 percent on Wednesday to stand at below $92.95 a
barrel.
    
    
    
    Gunzberg said the higher weighting for Brent was influenced
by production data for the U.K., North Sea-based crude which had
grown more dramatically than WTI's over the past 5 years.
    Brent replaced WTI as the global benchmark for crude in 2011
after increased logistical problems in getting U.S. oil supplies
transported from their hub in Cushing, Oklahoma. 
    Gunzberg estimated that from the 2011 rebalance through to
this year, about $23.4 billion would have left WTI, and about
$21.2 billion of that would have gone into Brent.
    Gold will see a total rise of 0.7 percent in 2014 weightings
that would shift an additional $1.1 billion toward the precious
metal.
    "In gold's case, the increased weighting was driven by
liquidity, as most of the available gold in the world is above
ground anyway, compared to the new production coming out from
mines," Gunzberg said in an interview with Reuters.
    Gold had seen huge growth in trading over the last five
years as many turned it as a safe-haven from the financial
crisis and protection against potential inflation from the U.S.
Federal Reserve's monetary expansion activities.
    Gold had an unbroken 12-year rally, reaching record
highs above $1,900 an ounce in 2011, before it fell nearly 30
percent in 2013 after the Fed began tightening its long-running
stimulus. This year so far, gold has rebounded 1.4 percent. On
Wednesday, it was down 0.8 percent at $1,222,21 an ounce.
    For natural gas, weightings would fall a cumulative 0.9
percent, taking an estimated $1.44 billion from the market.
    Natural gas prices surged 26 percent in 2013, in a
rally late in the year driven by bitter cold weather and signs
that production may be tapering. Since the start of this year,
gas has risen about half a percent on extended chilly weather,
and was down 1.2 percent at $4.247 per million British thermal
units in Wednesday's session.
    Prices at 1:33 p.m. EST (1833 GMT)                          
                     
                              LAST      NET    PCT     YTD
                                        CHG    CHG     CHG
US crude              92.81    -0.86  -0.9%    1.1%
Brent crude         107.32    -0.03   0.0%   -3.4%
Natural gas           4.250   -0.049  -1.1%   26.8%
                                                          
US gold             1226.20    -4.00  -0.3%  -26.8%
Gold                1225.50    -5.99  -0.5%  -26.8%
US Copper              3.40    -0.02  -0.5%   -6.8%
LME Copper         7323.50   -27.50  -0.4%   -7.7%
Dollar               81.087    0.254   0.3%    5.6%
CRB              275.421   -1.405  -0.5%   -6.6%
                                                          
US corn               417.75    -8.25  -1.9%  -40.2%
US soybeans          1300.00     0.50   0.0%   -8.4%
US wheat              591.50   -11.00  -1.8%  -24.0%
                                                          
US Coffee            120.80     3.55   3.0%  -16.0%
US Cocoa            2705.00    30.00   1.1%   21.0%
US Sugar              15.75    -0.31  -1.9%  -19.3%
                                                          
US silver            19.525   -0.003  -1.3%  -35.4%
US platinum         1405.10    -0.50   0.0%   -8.7%
US palladium         737.20    -4.50  -0.6%    4.8%