Commodities markets were volatile with traders warning that the ongoing sell-off could cause further casualties among investors, just a day after the closure of a leading commodities hedge fund.

The Reuters-Jefferies CRB index, a global benchmark for commodities prices, fell to a seven-month low after fresh losses in the energy and agricultural markets.

In another sign of the commodities rout, the Baltic Dry index, which measures the cost of shipping dry bulk commodities such as iron ore and grains, dropped 4.95 per cent to 6,146, the lowest level since February.

Ospraie Management announced that its flagship fund would be dissolved after posting heavy losses in August, which were largely due to the falling value of its energy and mining holdings.

John Reade, at UBS, said Ospraie was unlikely to be a one-off victim of falling raw materials prices.

“We had heard that a number of investors had been badly hurt by the moves in commodities in July and August. This [Ospraie] appears to be the first confirmation of that, although we do not think that the poor performance was confined to this one company,” he said.

Raw materials prices have declined across the board since oil touched an all-time high of $147.27 a barrel in July, amid traders’ fears that a global economic slowdown is damping demand.

Crude oil prices continued to fall. Nymex October West Texas Intermediate dropped 36 cents to $109.35 a barrel, having hit an intraday low of $105.46 on Tuesday after Hurricane Gustav caused less damage than expected to oil platforms on the US Gulf of Mexico. ICE October Brent was 28 cents down at $108.06.

Naumam Barakat, of Macquarie in New York, said: “At this stage there is very little interest in buying oil before $100 and I think rallies above $110 will continue to be sold.”

Falling oil prices helped to boost the US dollar and pulled down precious metals.

Gold lost 1 per cent to $796.45 a troy ounce in early trade before closing 0.2 per cent lower at $803.20. Silver lost 0.7 per cent to $13.03.

On the London Metals Exchange, most base metals rebounded slightly from losses earlier in the week but remained on a downward trend. Lead gained 1.57 per cent to $1,945 a tonne but remained 3 per cent lower on the month.

Copper rose 0.9 per cent to $7,345, its first gain in a week. Investors were showing renewed confidence in copper as it had managed to stay just above a resistance level of $7,125 during a difficult week, said Alex Heath, at RBC Capital Markets.

But he warned that, on the whole, investors were waiting for base metals to fall even further before buying. “We will get a day or two of rallies but emotion continues to be very negative.”

Aluminium fell almost 1 per cent to $2,675 a tonne.

In spite of the recent fall in base metals prices, activity at the LME is booming. Icap, the London-based broker, said that it had hired Robert Rees and Steve Bingley, former joint global heads of base metals at Bear Stearns, to head the firm’s new base metals broking business.

In agriculture, CBOT September soyabeans dropped 4.3 per cent to $12.45¼ a bushel, as the US government said 57 per cent of its soya crop was rated good to excellent, down from 61 per cent a week ago. CBOT September corn fell 2.44 per cent to $5.39½ a bushel.


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