Commodities declined to their lowest level since January, extending two weekly losses, after regulators raised capital adequacy requirements for the world’s biggest lenders and before Greece votes on austerity measures.
Crude oil dropped as much as 1.5 percent to $89.82 a barrel and copper lost 1.1 percent to $8,942.25 a metric ton. Gold for immediate delivery slipped as much as 0.8 percent to $1,491.20 an ounce, the cheapest price since May 20. The Standard & Poor’s GSCI index of 24 raw materials fell as much as 1.5 percent to 635.27, the lowest level since Jan. 28.
Greek lawmakers begin a three-day debate today on a 78 billion-euro ($110 billion) austerity package needed before the release of a loan payment and future financing, while the Basel Committee on Banking Supervision raised capital sufficiency requirements. Today’s drop trimmed the gain in commodities this year to less than 1 percent as measured by the S&P GSCI.
“This is a soft patch,” Dominic Schnider, head of commodity research at UBS AG’s wealth management unit, said by phone from Singapore today. “It’s a headwind that may turn into a tailwind next quarter. As long as the main engine like Germany is still working, we’re not concerned.”
Greek lawmakers vote on a five-year austerity plan that must pass for the cash-strapped nation to secure more international aid. Global regulators said on June 25 that banks deemed too big to fail must hold as much as 2.5 percentage points in additional capital as part of efforts to prevent another financial crisis.
Capital-Raising
Speculation that some banks may need to raise additional capital is “going to weigh on investor sentiment,” said Pauline Dan, Hong Kong-based chief investment officer at Samsung Asset Management, which oversees about $72 billion.
Money managers cut their net-long positions in 18 U.S. commodities by 13 percent to 1.13 million futures and options contracts in the seven-days ended June 21, data from the Commodity Futures Trading Commission show. That’s the biggest decline since May 10.
Crude oil for August delivery declined 0.7 percent to $90.57 a barrel on the New York Mercantile Exchange as of 10:31 a.m. London time. The most active contract has lost 12 percent this month and is heading for its worst performance since May 2010 as the International Energy Agency said it’s prepared to release more stockpiles to stabilize prices, after a June 23 pledge to inject 2 million barrels a day for 30 days.
“Leading into the IEA’s decision to release stockpiles, we had a global economy that was slowing and we already had concerns over Greece,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney.
Gold for immediate delivery fell 0.1 percent to $1,500.98, extending losses for a third day. Copper for three-month delivery dropped 0.3 percent to $9,021.5 a ton on the London Metal Exchange. Wheat for September delivery lost 1.1 percent to $6.535 a bushel, extending a three-day, 6.3 percent slump. Corn futures fell 1 percent, also sliding for a fourth day.
-- With assistance from Ann Koh in Singapore. Editor: James Poole
To contact the reporter on this story: Chanyaporn Chanjaroen in Singapore at cchanjaroen@bloomberg.net.
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net.
