Commodities traded near their lowest in five months, led by oil, on concerns that slowing global economic growth may crimp demand and as US rigs and refineries escaped major damage from Hurricane Gustav.
Natural gas fell today in New York, taking its five-day decline to 17 per cent, while crude oil changed little after reaching a five-month low yesterday. The Standard & Poor's GSCI gauge and the Reuters/Jefferies CRB Index slumped the most since March 19. The dollar gained for a fifth day, eroding the appeal of raw materials priced in the US currency.
“Commodity prices being stronger for longer never meant that they'd only ever rise,” said David Moore, commodity strategist at Commonwealth Bank of Australia in Sydney. Global growth “is not as strong as it was, but it's certainly not especially weak” and calling the end of the commodity cycle would be “premature”, he said in a telephone interview.
The S&P GSCI measure of 24 commodities dropped 31, or 4.4 per cent, to 677.06 yesterday. The gauge dropped 6.9 per cent in August and plunged 12 per cent in July, after surging 41 per cent in the first half. The CRB index fell 3.4 per cent to 378.55.
Natural gas and oil extended their declines today as oil companies and refiners inspected platforms and plants for hurricane damage.
An aerial survey of oil and natural-gas rigs in the Gulf of Mexico on September 1 found no structural damage. As much as 20 per cent of offshore oil and gas production may return to operation as early as this weekend, Louisiana Governor Bobby Jindal said September 1.
The S&P GSCI is at its lowest since April 3 and has fallen 24 per cent from a record on July 3. Lower raw-material prices may ease inflation, which accelerated to more than a 17-year high in the US in July and a 16-year high in the euro zone.
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Investors are concerned that the slowdown in economic growth in developed countries may spread to emerging markets as a form of “contagion,” Allen Sheals, executive director and senior commodities structurer at UBS AG, said on phone. “That's probably the risk.”
Stocks of commodity-related companies declined in Asia and Australia on concern lower metals and grains prices may hurt profits. Noble Group Ltd, a Hong Kong-based supplier of coal to soybeans, fell as much as 5.9 per cent to S$1.77 in Singapore trading, and was at S$1.78 at 12:20 pm local time.
Newcrest Mining Ltd, Australia's largest gold-mining company, fell as much as 7.6 per cent to A$22.95 and traded at A$237 at 2:20 pm Sydney time on the Australian stock exchange, its biggest fall since August 11. Olam International Ltd, which ships cotton, nuts and spices, dropped as much as 7.1 per cent to S$1.97 in Singapore, and was last at S$1.99.
Natural gas for October delivery fell 10.1 cents, or 1.4 per cent, to $7.16 per million British thermal units on the New York Mercantile Exchange at 12:20 pm Singapore time. The contract fell 8.6 per cent to $7.258, the past two days, the biggest drop since August 20, 2007. Floor trading was closed September 1 for the US Labor Day holiday and the two sessions were combined for settlement purposes.
Crude oil for October delivery dropped 65 cents to $109.06 a barrel after falling 5 per cent yesterday. Prices touched $105.46, the lowest since April 4, yesterday.
Gold for immediate delivery fell as much as 0.9 per cent to $798.27 an ounce in Singapore. The precious metal fell 1.5 per cent yesterday.