By Chanyaporn Chanjaroen
Sept. 9 (Bloomberg) -- Crude oil fell to a five-month low in London, leading commodities lower, after Saudi Arabia's oil minister said supplies are sufficient to meet demand before an OPEC meeting today to discuss production.
The S&P GSCI index of 24 commodity futures fell 1.1 percent as wheat, gold and nickel weakened. The oil market is ``well- balanced'' and inventories are ``healthy,'' Saudi Oil Minister Ali Al-Naimi said today in Vienna, suggesting the Organization of Petroleum Exporting Countries will maintain output.
``The risk of an oil production cut has been lifted,'' Hussein Allidina, a commodity analyst at Morgan Stanley, said by phone from New York.
Crude oil for October delivery dropped $1.55, or 1.5 percent, to $104.79 a barrel on the New York Mercantile Exchange as of 12:50 p.m. London time.
Oil also declined as Hurricane Ike, which has curbed output in the Gulf of Mexico, weakened to Category 1 on the five-step Saffir-Simpson scale of intensity. Ike was moving to the west- northwest across southern Cuba and is forecast to enter the southeastern Gulf of Mexico late tonight.
Agricultural commodities and gold also dropped after the dollar rose to the highest in 11 months against the euro, reducing their appeal as a hedge against U.S. currency weakness.
Soybeans for November delivery slid 25 cents, or 2.1 percent, to $11.67 a bushel and wheat for December dropped 14.75 cents, or 2 percent, to $7.29 a bushel. Wheat earlier fell to the lowest since Aug. 29, 2007.
Mortgage Rescue
``The dollar recovered yesterday, following the U.S. mortgage rescue plans, which is pressuring grains today,'' said Nicholas Chung, senior manager of the commodity derivatives team at Korea Development Bank in Seoul.
Gold slipped $3.69, or 0.5 percent, to $798.61 an ounce.
``The dollar is stronger and crude oil is declining,'' Alexander Zumpfe, a precious metals trader at Hanau, Germany- based Heraeus Metallhandels GmbH, said by phone. ``As long as these two sectors are under pressure, I don't see how gold will recover.''
Nickel fell $200, or 1.1 percent, to $18,650 a metric ton on the London Metal Exchange as Posco, Asia's largest maker of stainless steel, plans to extend output cuts for a third month, indicating weaker demand. Aluminum and copper also dropped.
South Korea's Posco will lower output by 20 percent, or 25,000 tons, from the normal monthly level, Suh Young Sea, senior vice president of the stainless-steel business, said today in a phone interview. About two-thirds of nickel production is used in stainless steel.
``Nickel is kind of stuck between weak demand and high supply,'' said Stephen Briggs, a commodity strategist at RBS Global Banking & Markets in London.
Copper, aluminum and zinc prices may slip by 5 percent to 10 percent as a slowing global economy crimps demand, Vedanta Resources Plc Chairman Anil Agarwal told reporters in Mumbai today, without providing a timeframe for the declines. The company is India's largest producer of zinc and copper.
Copper dropped $90, or 1.3 percent, to $6,860 a ton.
To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net
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