Commodity prices fall on concerns about demand

AP News
Posted: Apr 12, 2011 4:23 PM
Commodity prices fall on concerns about demand

Commodities fell across the board Tuesday on concerns that demand may slow because of high oil prices, Japan's nuclear crisis and other global issues.

Some of the steepest declines occurred in oil, wheat, corn, soybeans and palladium. Even gold and silver, which typically are considered relatively stable assets, fell.

Much of the movement was driven by a 3.3 percent decline in oil after new forecasts warned that rising prices could affect demand.

Goldman Sachs analyst David Greely said oil was due for a "substantial pullback." Despite the high prices, he wrote in a research note that inventories are adequate and there is spare production capacity in OPEC countries.

Oil prices have risen 33 percent since the middle of February on concerns about tightening supplies as rebellions spread across the Middle East and North Africa.

The International Energy Agency reaffirmed its forecast of an increase in oil demand of 1.4 million barrels a day to 89.4 million barrels a day this year. However, the agency said preliminary January and February data suggested high oil prices may have started to "dent demand growth."

The forecasts were released after the International Monetary Fund on Monday lowered 2011 growth forecasts for the United States, Japan and Britain.

"If you're worried about petroleum demand, you've got to be worried about demand for other things, too," said Jack Scoville, vice president of Price Futures Group.

Other global issues also weighed on the commodities market. Japan said its nuclear plant crisis was as severe as the 1986 Chernobyl accident. The plant was damaged in the March 11 earthquake and tsunami disaster.

In addition, investors monitored Europe's financial problems and high inflation in countries such as China, which is a huge importer of commodities.

Mike Zuzolo, president of Global Commodity Analytics & Consulting LLC, said he believes it's too early to say if commodity prices have hit peaks because much will depend on supply and demand going forward. There still are global shortages of corn and soybeans, while weather-related issues are affecting the U.S. winter wheat crop, he said.

Benchmark oil for May delivery fell $3.67, or 3.3 percent, to settle at $106.25 a barrel on the New York Mercantile Exchange.

In other Nymex contracts for May, heating oil lost 7.99 cents to settle at $3.1726 per gallon, gasoline dropped 3.64 cents to $3.1641 per gallon and natural gas fell 1 cent to $4.098 per 1,000 cubic feet.

In metals trading, June gold fell $14.50 to $1,453.60 an ounce and May silver fell 54.6 cents to $40.066 an ounce.

May copper dropped 7.65 cents to settle at $4.3835 a pound, July platinum fell $18.50 to $1,774.30 an ounce and June palladium lost $18.15 to $770.10 an ounce.

In May agriculture contracts, wheat fell 38.75 cents to settle at $7.595 a bushel, corn dropped 23.5 cents to $7.525 a bushel and soybeans lost 38.75 cents to $13.2975 a bushel.