Written by Sumit Roy  |

August 02, 2012

Market Wrap: NatGas Drops Most In 3 Years, Gold Slips, WTI-Brent Spread Widens; US Jobs On Tap

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A disappointing ECB policy decision pressured commodities today.

Commodities fell across the board after the European central bank disappointed markets in today's monetary policy decision. ECB President Mario Draghi said the central bank was gearing up to take action to stem the sovereign debt crisis in the eurozone, but that nothing would be done until September after the EU's permanent bailout fund, the ESM, goes into effect.

The decision at today's meeting to take no action disappointed many investors. Spanish 10-year bond yields—currently seen as the best gauge of eurozone sovereign debt fears—jumped 43 basis points to 7.17 percent.

In today's economic data, the number of people filing for unemployment benefits in the United States last week rose to 365K from 357K. The figure was slightly below expectations.

Friday's nonfarm payrolls report will give investors more information on the health of the U.S. labor market. Analysts are expecting the government to report that employers added 100K jobs in July, up from 80K in June.

The U.S. Dollar Index rose by 0.34 percent to 82.23.

• Traders sold gold today after the second central bank disappointment in as many days. The yellow metal was last trading down by $12.40, or 0.77 percent, to $1587.70, while silver edged down by $0.32, or 1.17 percent, to $27.12.
  
  Platinum lost $10, or 0.72 percent, to $1383 and palladium fell by $12, or 2.07 percent, to $568.
  
  "[Even though the ECB disappointed], that doesn't mean there will not be some kind of easing at some point soon," said Mitsubishi analyst Matthew Turner. "So I think probably we would still hold the levels that we held in June, July, which was around $1,550."
  
  
• Crude oil prices diverged today, as Brent lost a mere $0.08, or 0.08 percent, to $105.88, while WTI plunged by $1.72, or 1.93 percent, to $87.19. The spread between the two benchmarks now stands at $18.69.
  
  Infrastructure constraints in the U.S. Midwest remain responsible for the wide WTI-Brent spread. That has benefited Brent at the expense of WTI in terms of trading volumes and appeal as a global benchmark.
  
  "Since April of this year ICE Brent volumes have for the first time consistently exceeded CME WTI and by a big distance," said David Hufton, managing director of PVM Oil Associates.
  
  
• Natural gas fell by the most in three years today after the EIA reported a larger-than-expected build in inventories for last week. Operators injected 28 billion cubic feet into storage, said the EIA. That was bigger than the increase of between 20 and 23 bcf that most analysts were expecting.
  
  Gas was last trading down by $0.25, or 7.82 percent, to $2.92/mmbtu.
  
  
• The grain complex was lower across the board. Corn was last trading down by $0.02, or 0.25 percent, to $7.98/bushel, while soybeans fell by $0.25, or 1.5 percent, to $16.57 and wheat lost $0.06, or 0.68 percent, to $8.73.
  
  There's nothing in the fundamentals that changes the bullish view we've had for the past month. If anything, the outlook's getting worse with U.S. corn yields decreasing, Russia's wheat production decreasing and it's dry in Western Australia," said James Dunsterville, head analyst with Agrinews. "On the other hand a market can't continually go up, it has to see corrections, to allow people to take profits."
  
  
• Copper sank by $0.08, or 2.34 percent, to $3.30/lb, as the industrial metal was dragged down amid today's  broad-based selling in commodities.