Crude oil fell for a second session on Wednesday ahead of the latest US weekly inventories data while gold dropped below the $1,100 level awaiting key testimony on monetary policy to Congress by Ben Bernanke, chairman of the Federal Reserve.
Nymex April West Texas Intermediate fell 50 cents to $78.35 a barrel while ICE April Brent lost 56 cents at $76.69 a barrel.
US crude stocks were expected to have risen 2m barrels last week, according to a poll of analysts by Reuters, helped by a further recovery in imports that have been disrupted recently by bad weather in the Gulf Coast.
Demand from refineries was expected to remain soft with refinery utilisation forecast to remain unchanged at 79.8 per cent, due to unattractive profit margins for processing crude.
Petrol inventories were seen rising by 400,000 barrels.
Nymex March RBOB unleaded gasoline traded 1.1 cents, or 0.5 per cent, lower at $2.0550 a gallon.
Distillate stocks (including heating oil) were expected to have increased 1.6m barrels.
Nymex March heating oil traded 1.4 cents, or 0.7 per cent, lower at $2.0187 a gallon.
Last week, the US Department of Transportation released data showing that the number of miles travelled by US drivers barely rose last year in spite of the economy moving out of recession.
Miles travelled by US vehicles in the fourth quarter of 2009 was flat compared with the same period in the previous year. For the whole of 2009, this figure was 0.2 per cent higher than 2008.
Olivier Jakob, of Petromatrix, the Swiss consultancy, said there had been an improvement in activity by US motorists in the middle last year after wholesale petrol prices sank below the $1.50 a gallon level in the early months of 2009.
However, the rise in wholesale petrol prices back towards the $2.20 a gallon mark in the fourth quarter appeared to curb activity by US motorists.
Mr Jakob also pointed out that demand for petrol from emerging markets might also come under pressure as some governments were revising their policies of subsidised retail fuel prices as the burden on their public finances was becoming too painful.
Gold retreated below the $1,100 mark, trading at $1,092 a troy ounce after ending Tuesday’s session in New York at $1,101.65.
Sugar prices managed a limited rebound after a sharp decline during the previous two sessions.
ICE March raw sugar rose 1.6 per cent to 24.75 cents a pound, after dropping 9.1 per cent over the previous two sessions.
Liffe May white sugar also rallied 1.6 per cent to $664.5 a tonne, after dropping 7.4 per cent over the previous two sessions.
Dealers are wondering if the sugar market’s extraordinary rally has finally dissolved after a bull run that saw raw sugar prices reach a 29-year high and white sugar prices hit a record earlier in 2010.
The trigger for the correction earlier this week was provided by unexpected delays in buying fresh supplies by key importing countries. Both Egypt and Pakistan decided to cancel sugar tenders (purchases) because of high prices.
“We are seeing the impact of high prices on demand,” said Nicholas Snowdon, at Barclays Capital. “We should consider these deferred, rather than cancelled, purchases. The market’s fundamentals are strong, and it’s difficult to call this the end of the bullish story.”
Egypt is likely to require about 50,000 tonnes of sugar imports each month between March and August, but it has refused the offers provided at the previous two tenders as the asking prices were too high.
Pakistan’s domestic production season begins in November, and it has an estimated supply shortfall of 500,000 tonnes that needs to be satisfied before then.
Dealers said some of the prices quoted for the Pakistan tender were cheap “spam” offers well below current market levels from obscure suppliers. Although there was little prospect of sugar actually being delivered at these cheap prices, Pakistan’s buyers were in effect prohibited from accepting higher offers in the tender for fear of appearing profligate.
Nick Hungate, executive director at Rabobank, said: “The importing countries still have to buy. They are just delaying the inevitable.”
Mr Hungate said the prospect of fresh supplies from Brazil with its new crop, which will start in March, was weighing on sentiment, but the main issue for the market remained whether India would require another substantial importing campaign or if production in 2010-2011 would recover close to domestic consumption requirements.
Dealers also said that some investors with long positions might have been disappointed by the failure of the US Department of Agriculture to increase the US sugar import quota as supplies remain tight.
Karim Salamon, at Sucden, said the peak for sugar demand had not yet passed and further volatility appeared likely as there would be uncertainty over the extent to which the new crop expected from Brazil would alleviate supply tightness.
