Commodity prices extend losses

Commodities extended their losses on Tuesday on fears the US slowdown could spread to emerging markets, while traders took profits to offset losses in others markets.

Crude oil prices fell to a six-week low and agricultural markets fell sharply as traders sold corn, wheat and soyabeans, three of the best performing commodities in 2007, to offset losses elsewhere, analysts said.

Base metals, on the other hand, limited their losses with aluminium and copper prices losing less than 1.5 per cent on the day. But analysts remained concerned that energy and base metals are exposed to further economic slowdown.

Robert Laughlin of MF Global in London said that the immediate risk for commodities was “a liquidation of open positions by some market participants in order to finance positions on other markets.”

Nymex February West Texas Intermediate fell to $87.40 a barrel, a drop of $3.17 from Friday’s close, but about $1.29 below Monday’s last electronic quotes.

The Nymex exchange did not set a settlement price on Monday as the open-outcry trading floor was shut for a public holiday. But electronic trading late Monday had WTI at $88.69 a barrel, meaning the Tuesday loss was of about $1.29 a barrel.

ICE February Brent moved $1.32 down to $86.19 a barrel. Heating oil and petrol prices also lost ground tracking down crude oil prices.

On the London Metal Exchange, copper fell 1.44 per cent to a three-week low of $6,781 a tonne and aluminium moved 0.4 per cent down to $2,402 a tonne.

Peter Fertig, of Dresdner Kleinwor in Frankfurt, said: “Fears of a US recession dragging also the rest of the world into an economic slump had a negative impact on base metals.”

Although analysts said that copper, the base metals bellwether, is the most exposed to a US recession and any spill over to emerging markets, they also point that the red metal’s inventories have fallen recently and demand in China remains healthy.

Gold prices fell initially to a three-week low of $849.50 a troy ounce on heavy profit-taking, partially triggered by the strength of the US dollar against the euro. But it later recovered to trade at $861.25 an ounce, just below Monday’s $864.30 an ounce.

Agricultural commodities fell sharply after strong gains last year and early 2008. In Chicago, CBOT March corn fell by its daily limit of 20 cents to $4.78½ a bushel and CBOT March wheat shed 23½ cents to $9.39 a bushel. CBOT March soyabean lost 41 cents to $12.23 a bushel.