Oil, nickel and copper, among the best-performing commodities of the past five years, led declines in commodity prices today on concern losses in global financial markets will cut demand for raw materials.
Crude oil in New York dropped 3.2 percent as Tropical Storm Erin moved away from rigs in the Gulf of Mexico. Nickel tumbled 5.3 percent to its lowest in a year and copper slid 7.8 percent, the most since October 2004, leading a third day of metal declines in London. Gold fell for a fourth day, and silver was the biggest loser, dropping 8.4 percent.
Investors are selling all but the safest assets to cover losses as banks put a squeeze on credit amid rising U.S. subprime loan defaults. The Morgan Stanley Capital International World Index, a global stock market benchmark, dropped 1.4 percent today and is down 11 percent since peaking on July 16. The UBS Bloomberg CMCI Index of 28 commodities has lost 6.9 percent in the past month.
``Investors are looking for liquidity and commodities are getting hurt as a result,'' said Jochen Hitzfeld, a Munich-based analyst at UniCredit SA. ``Metals and oil are more vulnerable because they are strongly linked with the economic cycle.''
Crude oil for September delivery fell $2.33, or 3.2 percent, to $71 a barrel on the New York Mercantile Exchange. Nickel for delivery in three months on the London Metal Exchange dropped $1,400 to $25,100 a metric ton. Copper slipped $570 to $6,740 a ton, its lowest close since March 28.
Precious Metals
Silver paced declines in precious metals, dropping $1.06 to $11.495 an ounce on the Comex division of the New York Mercantile Exchange. Gold fell 3.2 percent to $658 an ounce as the dollar strengthened. Platinum fell to a four-month low and palladium traded at its lowest in five months.
``Some of gold's drop is equity-driven and some is dollar- driven,'' said Simon Weeks, London-based head of precious-metals trading at ScotiaMocatta, the metal-dealing unit of Canada's Bank of Nova Scotia.
Agricultural commodities also fell, as investors sold commodities to raise cash. Coffee and cotton had their biggest declines in two years and orange juice fell to an 18-month low. Soybeans fell to an 11-week low, and wheat fell after reaching a record high yesterday.
``My entire screen is bleeding,'' said Jaime Menahem, a coffee trader with Alaron Trading Corp. in Miami. ``Funds are liquidating everything in sight. They typically invest in a big pool of commodities and if they get an order to liquidate, they're going to get rid of it all.''
Index Declines
The Reuters/Jefferies CRB Commodity Price Index fell 10.61 to 301.27, after earlier reaching 299.19, the lowest since Feb. 12. The index's 3.4 percent decline was the biggest since at least September 1956, according to data compiled by Bloomberg. The CRB, which had almost doubled during the commodity rally that began in 2001, is down about 2 percent this year.
Weather forecasters at the National Hurricane Center yesterday altered the likely track of an Atlantic storm away from Gulf of Mexico platforms. About 27 percent of U.S. oil production and half the country's refining capacity are in the Gulf region, Energy Department data show. Hurricanes Katrina and Rita devastated production and refining in the region in 2005.
BP Plc, Europe's second-largest oil company, slid 4.1 percent to 520 pence in London share trading. BHP Billiton Ltd., the world's biggest mining company, fell 3.8 percent to $52.27 in New York, the third straight decline. Rio Tinto Group, the third-largest, dropped 7 percent to 2,929 pence in London.
Freeport-McMoRan Copper & Gold Inc., the world's second- largest copper producer, fell 6.2 percent to $73.07 at 4:21 p.m. in New York Stock Exchange composite trading. The Standard & Poor's 500 Metals and Mining Index fell to the lowest since Jan. 10.
Curbed Gains
The losses pared gains that have driven commodities such as oil, nickel and lead to records this year partly because of supply shortages. The UBS Bloomberg CMCI Index is headed for its sixth annual gain as the expanding economies of Asia spur demand for raw materials.
Copper has more than quadrupled during the past five years, reaching a record high in May 2006. Nickel has more than tripled, after touching a record in May this year. Crude oil touched $78.77 a barrel on Aug. 1, the highest ever, and has more than doubled since August 2002.
The Deutsche Bank Liquid Index, the best-performing commodity index this year through yesterday, has gained 11 percent.
Crude oil in New York dropped 3.2 percent as Tropical Storm Erin moved away from rigs in the Gulf of Mexico. Nickel tumbled 5.3 percent to its lowest in a year and copper slid 7.8 percent, the most since October 2004, leading a third day of metal declines in London. Gold fell for a fourth day, and silver was the biggest loser, dropping 8.4 percent.
Investors are selling all but the safest assets to cover losses as banks put a squeeze on credit amid rising U.S. subprime loan defaults. The Morgan Stanley Capital International World Index, a global stock market benchmark, dropped 1.4 percent today and is down 11 percent since peaking on July 16. The UBS Bloomberg CMCI Index of 28 commodities has lost 6.9 percent in the past month.
``Investors are looking for liquidity and commodities are getting hurt as a result,'' said Jochen Hitzfeld, a Munich-based analyst at UniCredit SA. ``Metals and oil are more vulnerable because they are strongly linked with the economic cycle.''
Crude oil for September delivery fell $2.33, or 3.2 percent, to $71 a barrel on the New York Mercantile Exchange. Nickel for delivery in three months on the London Metal Exchange dropped $1,400 to $25,100 a metric ton. Copper slipped $570 to $6,740 a ton, its lowest close since March 28.
Precious Metals
Silver paced declines in precious metals, dropping $1.06 to $11.495 an ounce on the Comex division of the New York Mercantile Exchange. Gold fell 3.2 percent to $658 an ounce as the dollar strengthened. Platinum fell to a four-month low and palladium traded at its lowest in five months.
``Some of gold's drop is equity-driven and some is dollar- driven,'' said Simon Weeks, London-based head of precious-metals trading at ScotiaMocatta, the metal-dealing unit of Canada's Bank of Nova Scotia.
Agricultural commodities also fell, as investors sold commodities to raise cash. Coffee and cotton had their biggest declines in two years and orange juice fell to an 18-month low. Soybeans fell to an 11-week low, and wheat fell after reaching a record high yesterday.
``My entire screen is bleeding,'' said Jaime Menahem, a coffee trader with Alaron Trading Corp. in Miami. ``Funds are liquidating everything in sight. They typically invest in a big pool of commodities and if they get an order to liquidate, they're going to get rid of it all.''
Index Declines
The Reuters/Jefferies CRB Commodity Price Index fell 10.61 to 301.27, after earlier reaching 299.19, the lowest since Feb. 12. The index's 3.4 percent decline was the biggest since at least September 1956, according to data compiled by Bloomberg. The CRB, which had almost doubled during the commodity rally that began in 2001, is down about 2 percent this year.
Weather forecasters at the National Hurricane Center yesterday altered the likely track of an Atlantic storm away from Gulf of Mexico platforms. About 27 percent of U.S. oil production and half the country's refining capacity are in the Gulf region, Energy Department data show. Hurricanes Katrina and Rita devastated production and refining in the region in 2005.
BP Plc, Europe's second-largest oil company, slid 4.1 percent to 520 pence in London share trading. BHP Billiton Ltd., the world's biggest mining company, fell 3.8 percent to $52.27 in New York, the third straight decline. Rio Tinto Group, the third-largest, dropped 7 percent to 2,929 pence in London.
Freeport-McMoRan Copper & Gold Inc., the world's second- largest copper producer, fell 6.2 percent to $73.07 at 4:21 p.m. in New York Stock Exchange composite trading. The Standard & Poor's 500 Metals and Mining Index fell to the lowest since Jan. 10.
Curbed Gains
The losses pared gains that have driven commodities such as oil, nickel and lead to records this year partly because of supply shortages. The UBS Bloomberg CMCI Index is headed for its sixth annual gain as the expanding economies of Asia spur demand for raw materials.
Copper has more than quadrupled during the past five years, reaching a record high in May 2006. Nickel has more than tripled, after touching a record in May this year. Crude oil touched $78.77 a barrel on Aug. 1, the highest ever, and has more than doubled since August 2002.
The Deutsche Bank Liquid Index, the best-performing commodity index this year through yesterday, has gained 11 percent.
Via: Bloomberg
by Saijel Kishan
by Saijel Kishan
