MPI Slumps As An Oil Price Decline Drives Broad Weakness, Ben Orhan, Senior Economist, IHS Markit

The IHS Materials Price Index (MPI) dropped 3.3% last week, its largest weekly decline since January 2016.The decline was broad based, with eight of the MPI's ten sub-indices down. The tone in commodity markets has become pensive since late February, with the price correction over the seven weeks now slightly greater than 8.0%.

Chemical prices lead the decline last week, falling 6.3%. Chemical markets slumped because of lower oil prices and better supply as the spring maintenance season ends and crackers return to production. Oil prices also recorded a notable decline, falling 3.6% as stubbornly high inventories outweighed an OPEC pledge to extend production cuts until year-end.

Data releases last week remained mixed. In the US, industrial production gained 0.5% in March, though a weather-related surge in utility output covers what was otherwise a weak number. In the Eurozone the Flash April composite PMI was strong at 56.7, remaining at its highest level in six years. The fairly large falls across the board this week are the result of increasing geopolitical tensions and growing stockpiles across the commodity sector. Markets are currently focused on the French election and the looming US budget battle, which promises to keep markets anxious into early May.