Metals and oil hit by US recession fears

Energy and base metals prices fell on Monday, on worries that the fiscal stimulus package proposed by US president George W Bush will not be enough to stop the US economy falling into recession.

The strength of the US dollar against the euro also weighed on energy, base and precious metals. In London, spot gold fell to $873.80 a troy ounce, down from $881.90 an ounce on Friday in New York.

However, agricultural commodities in Europe, such as wheat, rose supported by robust demand and signs that production is not rising fast enough to refill nearly depleted global inventories.

Crude oil prices fell to one-month lows, but traders said that cold weather in the US and the north-west of Europe would support prices in the near term.

Nymex February West Texas Intermediate fell $1.51 to $89.06 a barrel while ICE February Brent dropped $1.25 to $87.97 a barrel. Heating oil and gasoline also fell.

The Organisation of the Petroleum Exporting Countries, the oil cartel, said that near record prices were not related to market fundamentals. Opec will consider whether to increase its production at a meeting in Vienna on February 1.

Mohammed al-Hamli, United Arab Emirates oil minister, on Monday said the cartel will "explore all options", but warned: "There is a disconnect between the fundamentals and the price."

Base metals fell across the board on concerns that a slowing US economy will translate in lower demand for metals such as copper and aluminium.

In the London Metal Exchange, copper prices fell 2.7 per cent to $6.970 a tonne and aluminium moved 1.0 per cent lower to $2,472 a tonne. The fall in copper prices come even as inventories at LME's warehouses drop by 2,325 tonnes.

Zinc fell 1.9 per cent to $2,310 a tonne while lead dropped 2.9 per cent to $2,510 a tonne. Nickel fell 2.5 per cent to $27,900 a tonne.

Agriculture markets remained unaware of the economic turmoil. Euronext.Liffe May wheat prices in Paris rose 0.6 per cent to EU252 a tonne.

The Indonesian government said on Monday it will scrap a 5 per cent import duty on wheat flour in a bid to ease local prices.