Sept. 2 Crude oil and gold led a decline in commodities in London as
Hurricane Gustav spared the U.S. Gulf states the destruction caused by
Katrina and Rita in 2005.
The S&P GSCI index of 24 commodity futures has dropped as much as 7
percent in two days, to the lowest since April 2. Oil is trading at a
five-month low, 27 percent below the record $147.27 a barrel reached
July 11.
``Oil is the driver of today's declines in commodities, reflecting the
lack of appetite from investors,'' Frederic Lasserre, head of
commodities research at Societe Generale, said today by phone from
Paris.
Lower commodity prices may help ease inflation, which in the euro zone
dropped to 3.8 percent last month, from 4 percent. The World Bank
expects global growth to slow to 2.7 percent this year, from 3.7
percent in 2007.
Crude oil for October delivery fell as low as $105.46 a barrel on the
New York Mercantile Exchange, 8.7 percent less than on Aug. 29.
Today's trading is combined with yesterday's for settlement purposes
because of the Labor Day holiday in the U.S.
Workers from more than 70 percent of the platforms and rigs in the
Gulf were evacuated as Gustav approached. All of the area's 1.3
million barrels a day of oil and 7.06 billion cubic feet of gas, 95
percent of the total, was shut. Royal Dutch Shell Plc, Total SA and
ConocoPhillips said they were inspecting offshore U.S. Gulf platforms
today.
``The absence of serious structural damage from Gustav when the market
was braced for the worst has caused prices to turn decisively
downwards,'' said Christopher Bellew, a senior broker at Bache
Commodities Ltd. in London.
Gold Declines
Gold for immediate delivery fell as much as $16.28, or 2 percent, to
$801.42 an ounce, the biggest decline since Aug. 19. Gold dropped as
lower oil prices diminished the appeal of the metal as a hedge against
inflation.
Commodities also declined as the dollar strengthened against
currencies including the euro. Most commodities are priced in dollars
and some investors buy them as a hedge against further weakness in the
U.S. currency.
``In the short term, gold's direction will be determined by the moves
in crude oil and -- barring currently unapparent damage to Gulf of
Mexico production facilities or local refining operations -- the
downside appears vulnerable,'' John Reade, the head of metals strategy
at UBS AG in London, wrote in a report.
On the London Metal Exchange, copper for delivery in three month fell
as much as 2.4 percent to $7,128 a metric ton, the lowest intraday
price since Aug. 12. Stockpiles of the metal tracked by the bourse
rose 3.5 percent to 179,800 tons, the highest since Jan. 21,
indicating slower demand growth.
Supply Speculation
Zinc dropped for a second day on speculation supplies from mines will
expand faster than demand into next year. The metal dropped $35, or 2
percent, to $1,745 a ton.
Yunnan Chihong Zinc & Germanium Co., China's fifth-biggest zinc
producer, said it wasn't affected by the Aug. 30 earthquake in Sichuan
province and Nyrstar NV, the world's largest zinc producer, said its
U.S. smelter in Tennessee is unaffected by Hurricane Gustav.
``The main problem with zinc is a perception of oversupply,'' said Dan
Smith, a metals analyst at Standard Chartered Plc in London.
Corn for December delivery fell as much as 30 cents, or 5.1 percent,
to $5.55 a bushel, the lowest since Aug. 18, in after- hours
electronic trading on the Chicago Board of Trade. Soybeans also
slumped.
``The sharp drop in crude prices is the driving factor behind the
weakness in grains markets today,'' Toby Hassall, an analyst at
Commodity Warrants Australia in Sydney, said by e- mail. ``The impact
of Gustav was far less traumatic to the Gulf coastline than many had
expected. The fear premium that had been built into crude prices was
hastily wiped away.''
Robusta coffee for November delivery, the most actively traded
contract, fell as much as $26, or 1.2 percent, to $2,221 a ton on the
Liffe exchange in London.
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