Oil looks cheap, but investors are wary |

Oil looks cheap, but investors are wary

By Jane Merriman – Analysis

LONDON (Reuters) – A flight into cash during the credit crisis has
helped drive oil and other commodity prices down so steeply that they
are a potential “buy” for pension funds with a longer view.

But timing is everything.

“People are sitting on cash — big lumps of it,” said Mark Mathias,
chief executive of commodity fund manager Quantum Asset Management.
“Everyone is worried about when to go back in. Long-term, oil is
cheap, but who knows where it goes in the short term.” Investors are
searching for evidence that could signal whether the global downturn
may be near to the bottom.

In these troubled times, the Baltic Freight Index has become a key
leading indicator of economic vitality.

“The Baltic Freight Index is the electro-cardiogram for the world
economy,” said Hilary Till, principal, Premia Capital Management.

The Baltic Exchange’s main sea freight index .BADI has risen over the
last 10 days, but prices to ship commodities are still near their
lowest in more than two decades.

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