Wed Jun 20, 2012 6:01pm EDT
* CRB falls back after Tuesday’s biggest rally in 4 months
* Brent oil at 18-month low after Fed move and stockpile
* US copper down 2 pct; arabica coffee loses 3 pct
By Barani Krishnan
NEW YORK, June 20 (Reuters) – Commodities slumped on Wednesday, a day after the sharpest rally in four months, as investors expressed their disappointment with the U.S. Federal
Reserve for not being as aggressive as they had hoped in stimulating the economy.
Oil hit 18-month lows and copper and gold prices fell as the Fed ended a two-day meeting without announcing a third round of outright bond purchases or quantitative easing investors had been counting on.
Instead, the U.S. central bank said it was extending its effort to depress borrowing costs by selling short-term bonds and buying longer-dated ones — a maneuver known as “Operation
Twist — under a $267 billion program that would go on through the year.
“Unequivocally, the markets are disappointed with the Fed’s action,” said Adam Sarhan, chief executive at Sarhan Capital, a
New York-based financial advisory that also comments on commodity markets.
“The fact that the best the Fed could do is extend Operation Twist, even though we’re faced with a fiscal cliff in the United
States and a potential break-up in the euro zone, really puts the Fed’s ability to react in question,” Sarhan said.
The sell-off in commodities, particularly in oil, pulled the Thomson Reuters-Jefferies CRB index down 1.6 percent for its sharpest one-day loss since the start of the month. Just on Tuesday, the 19-commodity index, which serves as a global benchmark for the asset class, rose 1.3 percent for its biggest gain since February.
Oil prices tumbled 3 percent after the lack of aggressive action by the Fed coupled with data showing an unexpected
swelling in U.S. crude inventories. Brent crude closed at $92.69 a barrel, slumping $3.07 and marking the lowest settlement for the front month
contract since Dec. 17, 2010, while U.S. crude expired and settled at $81.80, falling $2.23, after hitting a session
low of $80.91, the lowest since Oct. 6. U.S. crude stockpiles rose last week by 2.86 million barrels, defying forecasts for a 1.1 million barrel decline,
according to data from the U.S. Energy Information Administration.
Crude stocks at the U.S. delivery point in Cushing, Oklahoma, itself rose by 360,000 barrels, the EIA data showed.
Traders have been expecting stocks to begin to ease from record highs after the reversal last month of the Seaway
pipeline, the first major conduit to pump oil from Cushing to the Gulf Coast.
“Investors are looking ahead and seeing that the situation in Europe isn’t going to get any better, while the outlook for
demand in the U.S. is poor and China is slowing too,” said David Morrison, analyst at GFT Global.
In copper, the metal’s most-active U.S. futures contract, July, shed roughly 2 percent to a touch a session low of
$3.3565 per lb in a knee-jerk reaction to the Fed’s statement. It finished down 4.60 cents at $3.3875 per lb. U.S. gold futures for July settled down $7.40, or half a percent, at $1,615.80 an ounce.
Coffee was another commodity that lost big in Wednesday’s session. The commodity’s premium-arabica grade, favored by
leading coffee chains, fell nearly 4 percent in New York trade to finish at below $1.51 per lb.
Prices at 5:29 p.m. EDT (2129 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US crude 81.06 -2.23 -2.7% -18.0%
Brent crude 92.59 -3.17 -3.3% -13.8%
Natural gas 2.517 -0.028 -1.1% -15.8%
US gold 1614.80 -7.40 -0.5% 3.1%
Gold 1605.29 -11.31 -0.7% 2.7%
US Copper 338.75 -4.60 -1.3% -1.4%
Dollar 81.400 0.022 0.0% 1.5%
CRB 272.910 -4.300 -1.6% -10.6%
US corn 611.75 -0.75 -0.1% -5.4%
US soybeans 1446.50 12.75 0.9% 20.7%
US wheat 664.00 14.50 2.2% 1.7%
US Coffee 150.75 -5.85 -3.7% -33.9%
US Cocoa 2167.00 -63.00 -2.8% 2.8%
US Sugar 21.74 0.17 0.8% -6.4%
US silver 28.389 0.021 0.1% 1.7%
US platinum 1466.80 -13.70 -0.9% 4.4%
US palladium 618.35 -9.90 -1.6% -5.8%
(Editing by Marguerita Choy)