Written by Sumit Roy  |

September 19, 2012

Market Wrap: Oil Nosedives After Inventory Report, Gold Steadies After BOJ Stimulus, Copper Rises

Details

Oil plunged, while other commodities made more modest moves.

Commodities traded mixed, but oil prices continued to plummet after the EIA reported a big increase in U.S. inventories for last week. In today's macro news, the Bank of Japan expanded its asset purchase fund from 45 trillion yen to 55 trillion ($700 billion). That's the equivalent of $130 billion of additional quantitative easing.

In the U.S., existing home sales jumped by 7.8 percent to 4.82 million units, well above the 4.56 million that was expected and the highest level since May 2010.

Meanwhile, housing starts rose 2.3 percent to 750K in August, while building permits fell 1 percent to 803K.

The U.S. Dollar Index fell by 0.19 percent to 79.1.

• Precious metals were mixed today. Gold was last trading down by $2.22, or 0.13 percent, to $1769.78, while silver fell $0.25, or 0.72 percent, to $34.57.
  
  Platinum gained $7.75, or 0.47 percent, to $1639.75 and palladium edged up by $5.75, or 0.86 percent, to $672.50.
  
  "I think other central banks will announce more accommodative policies and that should continue to support gold," said Jeremy Friesen, commodity strategist at Societe Generale.
  
  
• Crude oil plunged to the lowest levels since early August today. Prices have declined every session this week. Brent was last trading down by $4.49, or 4.01 percent, to $107.54, while WTI fell by $3.98, or 4.18 percent, to $91.31.
  
  The EIA said that U.S. crude oil inventories increased by 8.5 million barrels, gasoline inventories decreased by 1.4 million barrels, distillate inventories decreased by 0.3 million barrels and total petroleum inventories increased by 11.4 million barrels last week.
  
  "This is a massive build in supplies," said Stephen Schork, president of the Schork Group. "We were already moving lower because of the Saudi headlines and this number is adding to the bearish sentiment."
  
  
• Natural gas was last trading up by $0.01, or 0.32 percent, to $2.78/mmbtu, as prices remained range-bound between $2.60 and $3.20.
  
  The Energy Department delayed a report on the economic impact of natural gas exports. The DOE now expects the study to be complete by the end of the year.
  
  
• The grain complex rebounded after plunging in recent sessions. Corn was last trading up by $0.13, or 1.79 percent, to $7.53/bushel, while soybeans gained $0.27, or 1.63 percent, to $16.67 and wheat rallied $0.12, or 1.36 percent, to $8.75.
  
  "There is bargain hunting with more fund money coming into the market today," one European trader said. "This is supporting soybeans and pushing up wheat and corn in sympathy, with wheat seeing some chart-based buying."
  
  
• Copper was last trading up by $0.03, or 0.7 percent, to $3.83/lb on Comex—close to the highest levels in 4-1/2 months.
  
  "It was really the BOJ announcement that spurred the rises today but this is not going to carry very far. People have seen improved sentiment, they have seen the central banks take action, so the question is: does all this feed into improved activity?" said Credit Suisse Metals Analyst Ivan Szpakowski. "Real demand is still slow. The big questions are: will it improve? How much? How fast?"