Bloomberg News

Commodities Tumble Most in a Week, Led by Oil, Nickel, Wheat

October 26, 2011

Oct. 26 (Bloomberg) -- Commodities fell the most in a week, led by oil, nickel and wheat, on a bigger-than-expected gain in crude inventories and speculation that demand for U.S. grain will shrink as the global economy falters.

The Standard & Poor’s GSCI Index of 24 raw materials dropped 1.8 percent after oil declined the most in more than three weeks in New York. The index retreated for the first time in four days as commodity prices declined amid concern that European debt-crisis talks are stalling. Gold and silver rose.

“The markets that fell were working based on their own fundamentals and the economic outlook,” said Mike Armbruster, a commodities analyst at Altavest Worldwide Trading in Mission Viejo, California. Crude’s supply increase “was a nice excuse for that market to pull back.”

The S&P GSCI index dropped to 637.76. Commodity prices have rebounded 11 percent from a 10-month low on Oct. 4. Eighteen of the commodities in the index declined today.

Crude oil for December delivery fell $2.97 to settle at $90.20 a barrel on the New York Mercantile Exchange after the Energy Department said supplies rose 4.74 million barrels to 337.6 million last week. The increase was more than three times the median of analyst estimates in a Bloomberg news survey.

The contract’s drop was the biggest since Sept. 30.

“The crude number was very bearish,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in New York. “If we were trading on the inventories alone, we would be in the lower $80s.”

Brent Crude

Brent oil for December settlement dropped $2.01, or 1.8 percent, to $108.91 a barrel on the London-based ICE Futures Europe exchange.

Prices for raw materials extended losses late in the trading day on a report that China may contribute to a planned euro-area investment vehicle and speculation that it would cut other holdings, said Rich Ilczyszyn, a Chicago-based senior market strategist at MF Global Holdings Ltd.

“If China’s going to participate, they’re going to have to sell dollar-based assets,” he said.

French President Nicolas Sarkozy plans to call Chinese leader Hu Jintao tomorrow to discuss China contributing to a fund European leaders may set up to bolster the region’s debt- crisis fight, a person familiar with the matter said.

Nickel for three-month delivery fell 3.2 percent to $19,125 a metric ton on the London Metal Exchange. The price has dropped 23 percent this year amid concern that Europe’s debt crisis will cripple global economic growth, curbing demand for the metal.

Gold Rises

Gold futures advanced to a one-month high, extending the longest rally since August, as delays in resolving Europe’s debt crisis spurred demand for the precious metal as a protection of wealth.

Gold for December delivery gained 1.4 percent to settle at $1,723.50 an ounce on the Comex in New York. The four-session rally is the longest since Aug. 22.

Silver futures for December delivery rose 0.8 percent to close at $33.31 an ounce on the Comex. The metal is up 7.7 percent this year.

Wheat futures fell the most in two weeks on speculation that demand will shrink for U.S. supplies as the global economy falters and competition increases from Russia.

Egypt, the world’s biggest wheat importer, bought 120,000 metric tons of Russian grain. Russia lifted a ban on exports in July following last year’s drought.

Wheat futures for December delivery fell 2.6 percent to settle at $6.195 a bushel on the Chicago Board of Trade, capping the biggest drop since Oct. 12. The price has fallen 22 percent this year.

Wheat is the fourth-largest U.S. crop, valued at $13 billion in 2010, behind corn, soybeans and hay, government data show.

--With assistance from Yi Tian in New York, Whitney McFerron in Chicago, Nicholas Larkin in London and Phoebe Sedgman in Melbourne. Editors: Bill Banker, Richard Stubbe

To contact the reporters on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net; Mark Shenk in New York at mshenk1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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