Tags: commodities | selling | oil | soybeans

Commodities Hit by Selling for a Second Day

Tuesday, 18 Sep 2012 05:06 PM

Commodities slumped on Tuesday for a second day as nagging economic problems in the United States and Europe made investors cautious about the demand outlook for oil, metals and crops at prices that had spiked on stimulus efforts by central banks.

Euphoria over the Federal Reserve's enlarged $40-billion per-month bond-buying program -- announced last Thursday -- had fueled a run-up in many commodity markets. But sentiment has fizzled in the absence of fresh evidence of U.S. recovery.

In the eurozone, pressure grew on Spain to request aid and test a European Central Bank bond-buying program. The dollar jumped against the euro, further weighing on commodities priced in the U.S. currency.

Crude oil fell more than 1 percent, down about 4 percent so far this week after Monday's heavy liquidation.

Soybeans showed a 6 percent decline for the week-to-date.

Copper steadied after Monday's selloff, dipping slightly in New York and edging higher in London. But outlook for the No. 1 base metal remained weak.

"With the Fed's 'easing news' behind us, investors will now have to refocus on the dreary economic landscape and the unresolved debt situation still simmering in Europe," said Edward Meir, an analyst for base metals at INTL FCStone.

"Unfortunately, neither of these will be fixed with by 'easy money', particularly in the case for a hoped-for economic rebound in the U.S. where the Fed's action needs time to play out."

Among precious metals, platinum fell 2 percent, as striking platinum miners at South Africa's Lonmin mine accepted a pay offer that could have them returning to work on Thursday.

The bellwether 19-commodity Thomson Reuters-Jefferies CRB index fell 1 percent, adding to Monday's 2 percent decline and marking its sharpest two-day slide since June.

Oil was also pressured by No. 1 producer Saudi Arabia's move to pump around 10 million barrels per day and bring prices of benchmark Brent crude closer to $100 per barrel, according to a senior Gulf source.

Brent settled at $112.03 per barrel, off Friday's 4-month high of nearly $118.

A majority of oil producers in OPEC want oil prices around $100 per barrel and would boost production over the next few months, the Gulf source said.

"Unless there is a major supply disruption in the Middle East, there is nothing to push it higher," said analyst Andrey Kryuchenkov at VTB Capital. "Saudi will seek to drive it closer to $100 and everyone knows it."

Soybean prices hit a one-month low as euphoria over the Fed stimulus faded, and U.S. harvest of the crop advanced at a record pace despite worries earlier of damage from a disastrous drought.

"There has been a convergence of negative news," Don Roose, president of U.S. Commodities in West Des Moines, Iowa, said, referring to soy.

Better-than-expected soy yields, concern that demand from top soy importer China was set to wane and a surge in the slaughter of U.S. hogs -- one of the main consumers of soy feed -- added to the market's bearishness.

Soybeans settled down 1.8 percent at $16.40 per bushel in Chicago trade, after touching $16.30-1/2, a low since Aug 17. The contract had scaled record highs above $17.55 earlier this month as hot weather wilted crops in the U.S. Midwest farm belt.

Soybeans aside, corn also saw extended pressure from Monday's selloff, falling 1.7 percent in the latest session. Wheat fell nearly 1 percent.

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Commodities slumped on Tuesday for a second day as nagging economic problems in the United States and Europe made investors cautious about the demand outlook for oil, metals and crops at prices that had spiked on stimulus efforts by central banks.
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