Commodities markets were heavily manipulated in 2008 and much of the demand created in the year was artificial, a European investment bank said in its latest report.
Saxo Bank, a Copenhagen-based investment house, said the charts showing the demand for commodities may have had inflated figures.
The bank said the rock bottom commodities prices prevailing now may be a result of accumulation of four to five years of stockpiles.
"After scrutinising supply and demand statistics, we believe that the official data has been manipulated in order to scare the demand side into panic buying," said the bank, which predicts oil prices will fall down to $25 a barrel in 2009.
Last year was the year when the commodities market became the most speculative ever driving prices of oil and several other commodities to historic highs, the bank said, adding that the entrance of powerful speculators into the markets inflated the prices.
"There is no doubt that a big speculative element entered this market – mutual, pension and hedge funds have all found commodities to be the new element, which they believed, would enable them to decrease the volatility of their returns," Saxo bank said releasing its forecast for 2009. It termed its predictions "outrageous".
Prices of all the commodities fell in 2008. While oil prices that fell to almost a fourth of their value in July 2008, were most in the limelight prices of steel, aluminium and other commodities have similarly fallen.
The average price of steel trading at London Metals Exchange stands at $325 per tonne and that of aluminium at $1341.50 per tonne.
Data depicting demand in 2009 may have been skewed, the bank said.
"The emergence of funds with the sole purpose of investing in physical markets itself has taken some of the physical metals off the data table, skewing the statistics to show that the demand was outstripping supply."
Contrary to perceptions that the surplus of commodities in the market has built up over a period of past three to six months, the bank said that the build-up in fact comes over a period of four to five years.
"These positions now seem to be getting dumped on the market," the Denmark-based bank said.
Saxo Bank took a banal position on oil and in one of its 10 predictions for 2009 said that the price per of barrel can hit a low of $ 25 a barrel.
It said the demand for oil may remain battered for at least a decade.
"Even for crude oil, we are now seeing the total mileage driven in the US – a measure previously thought to be completely inelastic – dropping for the first time in the last 50 years," the report said. China which was earlier expected to drive demand in 2009 is also giving disappointing signals, it Bank said.
Gold is only commodity that is expected to perform well in 2009 because of its potential to be used as an investment weapon, the bank said. There is another commodity, much of which is wasted the world over, that will perform well in 2009 the bank said.
"Water tables are falling in countries that contain more than half the world's people – including the three big players: China, India and the US. We do not see these facts are priced into the water stocks yet."