Oil and commodities fall on Greek fears

Oil prices tumbled to their lowest level of the year and other commodities suffered steep falls as pessimism about Greece’s future intensified on Wednesday.
US crude dropped through $90 a barrel to levels not seen November last year as other commodities linked to global economic prospects were offloaded.
Hopes that western powers and Iran were moving towards a deal to avert potential conflict in the Middle East over Tehran’s nuclear programme contributed to a sharp drop in oil prices.
The benchmark Reuters-Jefferies CRB index, a basket of commodities from wheat to copper fell to a 20-month low of 281.13 points. The index, which is closely followed by investors such as pension funds, is down 10 per cent for the year to date and roughly 40 per cent below the all-time high set in mid-2008.
The sharp drop in raw materials prices over the last three weeks has prompted investors to ask whether the so-called “commodities supercycle” on the back of the industrialization of emerging markets such as China has come to an end.
Natural resources executives say the cycle remains a potent market force, pointing out that that similar price falls in 2008 after the global financial crisis erupted, and in 2010 during the start of the eurozone sovereign debt crisis, proved short-lived.
But some analysts are warning that slower economic growth in China, and a shift by Beijing from investment in infrastructure towards domestic consumption, could cool commodities markets.
ICE July Brent, the global benchmark, fell $2.76 a barrel in late afternoon trading to a 5-month low of $105.65, while US oil prices fell through the $90 key support level, with Nymex July West Texas Intermediate falling $2.14 to $89.71.
Gold, whose recent volatility has had investors questioning its haven qualities, fell 1.8 per cent to $1,539.10 a troy ounce, while copper for three-month delivery on the London Metal Exchange fell 2.7 per cent to a four-month low of $7,524 a tonne.
Iron ore prices hit a seven-month low of $132.5 a tonne, down 10 per cent this month. Thermal coal prices in Australia, which set the benchmark for Asia, fell to the lowest since September 2010, sliding to $93.60 a tonne. Both commodities, used in steelmaking and utilities, are important for the profitability of miners.
The drop in commodities prices hit the shares of natural resources companies. Blue-chip miners such as BHP Billiton, Rio Tinto, Xstrata and Anglo American lost between 4 and 5 per cent on the day. Kazakhmys lost nearly 8 per cent.
Commodities trading houses also suffered. Glencore lost 4.9 per cent, while Singapore-listed Noble Group and Olam fell 4 and 5.7 per cent, respectively. Oil companies fared better, with share prices falls of 1-3 per cent for ExxonMobil, Royal Dutch Shell, BP and Chevron.

Financial Times, 23.05.2012