A peak at the pump? Oil falls amid broad commodity sell-off
Some of the air came out of the commodity market mini-bubble today as optimism waned about a second-half economic recovery.
Oil slumped $2.43, or 3.5%, to $66.12 a barrel, the biggest drop since May 15 -- offering a ray of hope to aggravated consumers who've been shelling out more at the pump every week.
Prices were down nearly across the board for other commodities, including natural gas, wheat, corn and copper. Gold, once again foiled as it neared the $1,000 mark, slid $18.70 to $964.50 an ounce. The Reuters/Jefferies CRB commodity index fell 2.7%, its biggest loss since April 20.
Prices of many commodities have surged in recent months as investors and traders have reacted to better-than-expected economic data and some signs of rising demand. But as I noted in this post, some analysts have accused speculators of running away with the market, in a more modest version of what happened in the first half of 2008.
Today, commodity buyers were scared away by some disappointing U.S. economic data, which also drove money back into the beaten-down dollar as a haven. The greenback’s slide this year had helped to underpin the commodity rally as some investors sought hard assets over the dollar.
The oil market was hit by a double-whammy: data showing a renewed jump in supplies while demand declined amid the highest pump prices in eight months.
From Bloomberg News:
U.S. oil inventories climbed 2.9 million barrels to 366 million in the week ended May 29, according to the Energy Department. The gain occurred as imports surged 9.9% and refineries increased operating rates to the highest level in six months.
Fuel demand fell 900,000 barrels to 17.7 million barrels a day last week, the biggest decrease since the week ended Jan. 9. Gasoline consumption slipped 518,000 barrels to 9.02 million, the biggest decline since January 2005.
"The high inventories and weak demand we’re seeing don’t justify prices in the $60s," said Chip Hodge, a managing director at MFC Global Investment Management in Boston. "The fundamentals are catching up with the market. Prices have gotten ahead of where they should be."
-- Tom Petruno
Photo: Prices at a Shell station in Redwood City, Calif. Credit: Paul Sakuma / Associated Press