A driver looks at the price board by the pumps at a petrol station in Madrid.© Susana Vera / Reuters/Reuters
Bearish comment on the outlook for oil and copper prices from Goldman Sachs and price target cuts for mining stocks from Credit Suisse added to the nervous tone on commodities markets on Tuesday.
Goldman, regarded as one of the more bullish on commodities, lowered its Brent crude oil price outlook for 2012 from $130 (U.S.) to $120 per barrel and cut its copper price forecast from $10,790 to $9,200 a tonne.
Crude oil weakened, with November ICE Brent sliding 81 cents a barrel to $100.90 and November Nymex West Texas Intermediate falling $1.28 a barrel to $76.30 in European morning trading. Among industrial metals, copper for three month delivery on the London Metal Exchange fell 0.6 per cent to $6,833 a tonne.
The investment bank's economists do not expect the situation in Europe to trigger a world economic recession as seen in 2008, and the commodities research team regarded "the turmoil in Europe as a headwind to world economic growth, which we expect will only take away some of the upside to commodity prices, not reverse it".
Mining stocks took another hit as Credit Suisse cut its target prices for the leading mining companies, while downgrading Anglo American from outperform to neutral and Lonmin from neutral to underperform. It also upgraded BHP Billiton, the market leader, from neutral to outperform.
BHP fell 2.2 per cent to £16.72 and Anglo declined 4 per cent to £21.24. Xstrata lost 4.2 per cent to 758p, Lonmin declined 3.6 per cent to 992.5p and Glencore, the trading house, retreated 3.5 per cent to 376.5p.
Overall, commodities markets continued to soften, as Greek debt worries and the resulting credit tightening affecting global economic growth defined sentiment.
The events surrounding the euro zone debt crisis remained at the forefront of many commodities traders' minds. A poll by Macquarie for this week's London Metal Exchange week revealed that more than half surveyed rated a collapse of the European economic system as their biggest worry at present.
Gold, which seems to have regained its status as a haven asset over the past few days, rose 0.75 per cent to $1,669.94.