Commodities Extend Decline to Five-Year Low on Oil to Tin

Commodities extended declines to a five-year low led by industrial metals and oil on speculation supplies are more than sufficient with prices of everything from gasoline to food falling.

The Bloomberg Commodity Index fell 0.6 percent at 12:55 p.m. in London after dropping to the lowest since July 2009. Zinc declined 3 percent, nickel retreated 2.5 percent and West Texas Intermediate fell below $80 a barrel for the first time since June 2012.

A Bank of America Corp. survey of fund managers this week showed the lowest optimism in the outlooks for economic growth and inflation in two years, pushing them to increase their cash balances and avoid commodities. An index of food prices compiled by the United Nations dropped to the lowest since August 2010 last month and regular gasoline prices in the U.S. are the lowest since February 2011.

“Recent sharp declines in food and energy prices suggest further downside for headline inflation,” Andrew Cates, an economist at UBS AG in London, said in a report today. “Excess capacity outcomes in most of the world’s large economies, including China, and the unique issues that bedevil the latter, could further undermine globally traded goods prices.”

Zinc led declines in the Bloomberg commodity index and lead dropped to the lowest since May 2013. Lead inventories in warehouses monitored by the London Metal Exchange rose 5.2 percent this year. Nickel stockpiles are up 43 percent.

Inflation Signs

U.S. wholesale prices unexpectedly slid for the first time in a year in September and Chinese factory-gate prices dropped for a record-tying 31st month, data showed yesterday. Economic growth in China, the biggest user of industrial metals, was the slowest in five years in the third quarter, economists surveyed by Bloomberg said before data due Oct. 21.

“Everyone’s been concerned about the China story,” said David Lennox, a resource analyst at Fat Prophets in Sydney. “If you can’t see the metal demand here and now, people aren’t taking the chance.”

WTI dropped as much as 2.5 percent to $79.78 a barrel, the lowest since June 29, 2012, and Brent declined 1.4 percent to $82.60 a barrel, the lowest since Nov. 23, 2010.

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