Industrial Commodities Extend Slide as Coronavirus Dents Demand
February 27 2020 - 10:30AM
Dow Jones News
By Amrith Ramkumar
Commodities from oil to copper kept dropping Thursday,
continuing a recent slide as traders expect the spreading
coronavirus to cripple demand.
U.S. crude-oil futures slid 4.9% to $46.33 a barrel on the New
York Mercantile Exchange, heading for their lowest close since the
end of 2018. Prices are now 30% below a peak hit in early January.
Brent crude, the global gauge of oil prices, declined 4.1% to
$51.23 a barrel on the Intercontinental Exchange.
Industrial metals also dropped. Most-active copper futures fell
1.2% to $2.5425 a pound in New York, while aluminum, zinc, tin and
nickel declined on the London Metal Exchange and extended recent
declines.
Thursday's synchronous slide came with stocks around the world
tumbling and extended a punishing stretch for commodities sensitive
to the transportation and manufacturing sectors.
China is a key source of demand for the materials, so the early
year slump in economic activity in the country as a result of the
coronavirus has fueled projections for lukewarm consumption and
excess supply.
More recently, the virus spreading to many other parts of the
world has caused anxiety about a larger-than-expected drop in
global travel. On Wednesday, a new case of coronavirus was
confirmed in California that involved a person who reportedly
didn't have a travel history or exposure to another person known to
have the illness.
The rise of cases in countries from South Korea to Italy has
also fanned fears that the ripple effects of the virus could result
in supply gluts for a range of materials.
"The spread of the virus is spreading not only fear but
oil-demand destruction and horror thinking about potential demand
destruction to come," Phil Flynn, senior market analyst at the
Price Futures Group, said in a note to clients.
Oil-market traders are looking ahead to a coming meeting of the
Organization of the Petroleum Exporting Countries to see if the
cartel deepens output cuts in an effort to stabilize the market.
The move is expected, but some analysts question whether even
deeper supply curbs will boost crude with demand expected to fall
substantially.
Hedge funds and other speculative investors have cut net bets on
higher U.S. crude prices, pushing them to a nearly four-month low
during the week ended Feb. 18, Commodity Futures Trading Commission
figures show. At the same time, speculators have ramped up net
wagers on lower copper prices.
Data for the week ended Tuesday will be released on Friday, with
some analysts noting that a reversal in speculative wagers has
likely made the slide in commodities even more severe.
Elsewhere in commodities Thursday, natural-gas futures tumbled
5.2% to $1.742 a million British thermal units, heading for a
roughly four-year low with traders expecting mild winter
temperatures and steady production to result in a glut of the
heating fuel. The coronavirus has also dented demand for natural
gas.
Most-active gold futures stabilized, rising 0.7% to $1,655 a
troy ounce and climbing back toward a seven-year peak hit Monday.
Investors have favored the safe-haven metal recently, though prices
slid on Tuesday and Wednesday.
Write to Amrith Ramkumar at amrith.ramkumar@wsj.com
(END) Dow Jones Newswires
February 27, 2020 10:15 ET (15:15 GMT)
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