Commodities fell toward a five-year low as oil extended a slide into a bear market amid signs of ample supplies and industrial metals dropped on concern slowing growth from Europe to China will sap demand.
The Bloomberg Commodity Index lost as much as 0.7 percent to 118.0102 points, cutting this week’s increase to 0.1 percent. The gauge fell the previous five weeks in the longest run of losses since April last year. It slid 12 percent last quarter, the most since 2008, on burgeoning supplies of everything from oil to corn and as a stronger dollar makes raw materials priced in greenbacks more expensive in terms of other monies.
Brent crude dropped as much as 2.2 percent today, trading close to a four-year low, on signs of a global glut. European equities slipped as European Central Bank President Mario Draghi said there are signs the region’s recovery is losing momentum, while Federal Reserve officials said this week the U.S. economy may be at risk from a global slowdown. The International Monetary Fund this week cut its outlook for world growth.
“Commodities have been hit not only by fears of a slowdown in Europe and in China, but also by ongoing increases in supply for some commodities,” Jesper Dannesboe, a senior commodity strategist at Societe Generale SA, said by phone from London. “Oil is oversupplied, there’s a supply story on many agricultural products,” and the dollar’s gain over the past few months has weakened demand for raw materials, he said.
The Bloomberg Commodity Index was at 118.1603 by 10:27 a.m. in London, after reaching 117.6944 on Oct. 3, the lowest since July 2009. The measure is down 6 percent this year, compared with a 1.2 percent decline for the MSCI All-Country World Index of equities. The Bloomberg Dollar Spot Index lost 1.1 percent this week after reaching a four-year high on Oct. 3.
China is the largest user of everything from soybeans to copper to iron ore. The nation’s economy will expand 7.3 percent this year, the least since 1990, economist estimates compiled by Bloomberg show. The euro area will grow by 0.8 percent, after two years of contraction.
Draghi clashed with Germany’s finance minister yesterday over the steps needed to revive growth in the euro area. The region has re-emerged as the main concern of officials worldwide after its economy stalled and inflation slowed to the weakest in almost five years.
Copper led industrial metals lower, slipping 1.2 percent to $6,639.75 a metric ton on the London Metals Exchange. Corn fell 0.9 percent to $3.4175 a bushel on the Chicago Board of Trade and soybeans slid 0.8 percent to $9.34 a bushel before a U.S. Department of Agriculture report today that is expected to show record U.S. production of both crops.
Time for Corn Crop Triage
Gold lost 0.2 percent to $1,221.86 an ounce in London, set for the first decline this week, according to Bloomberg generic pricing. It slid to a nine-month low on Oct. 6. The dollar rose for a second day versus 10 major currencies, paring its first weekly drop since August.
West Texas Intermediate crude fell as much as 2.5 percent to $83.59 a barrel in New York, the lowest since July 2012. It closed yesterday more than 20 percent below its June peak, a common definition of a bear market. Brent crude traded as low as $88.11 a barrel in London, the lowest since December 2010. Demand growth is slowing at a time when output is expanding from countries including the U.S. and Russia, the largest suppliers outside the Organization of Petroleum Exporting Countries.
U.S. oil output increased to 8.88 million barrels a day last week, the most since March 1986, according to the Energy Information Administration. Crude inventories in the world’s biggest oil consumer gained by 5 million barrels to 361.7 million in the week to Oct. 3, the EIA, the Energy Department’s statistical arm, said on Oct. 8.
Tightness in “supply and demand isn’t a major issue,” David Wilson, an analyst at Citigroup Inc. in London, said by phone today. “Cheaper energy costs should be actually positive for economic activity, but we’ll have to wait and see how that plays out.”