COMMODITIES-Oil down 2nd day as Greek deal fades; wheat jumps

Tue Nov 27, 2012 3:31pm EST

* Brent crude oil back below 100- and 50-day moving averages

* Wheat hits 2-week high on record low rating for US crop

* Soy, corn also rally; raw sugar, arabica edge higher

* Copper erases early gain; nickel up on Indonesia exports

By Barani Krishnan

NEW YORK, Nov 27 (Reuters) - Oil prices fell for a second straight day on Tuesday as enthusiasm over a new debt deal for Greece fizzled and U.S. fiscal worries resurfaced, while wheat hit a two-week high on supply tensions.

News of an agreement between euro zone finance ministers and the International Monetary Fund to reduce Greece's debt provided only fleeting relief to commodity markets as skepticism remained about the broader euro zone economy.

Oil traders eyed the looming U.S. "fiscal cliff" as a sign of further headwinds for fuel demand. The U.S. Congress showed some signs of advancing toward a compromise on taxes and spending, but a firm deal by the end of the year to avoid appeared miles away.

The dollar, meanwhile, rebounded against the euro on data showing U.S. consumer confidence at its highest in more than four years. The U.S. currency's strength weighed somewhat on demand for dollar-denominated commodities.

The 19-commodity Thomson Reuters-Jefferies CRB index settled flat, surrendering early gains helped by the debt deal for Greece.

NICKEL RALLIES, OIL CHOPPY

Nickel, a base metal used for making stainless steel and other corrosion-resistant alloys, was the biggest gainer on the CRB, rising nearly 3 percent after news that Indonesia's nickel ore exports rose in October on buying from China.

Leading industrial metal copper was flat after initially striking a three-week high on the funding agreement for Athens.

Oil prices eased in choppy trading due to doubts about the latest attempt to address Greek debt and uncertainty about U.S. fiscal negotiations ahead of the year-end deadline.

Greece's international lenders agreed to a package of measures to reduce Greek debt by 40 billion euros, cutting it to 124 percent of gross domestic product by 2020, but analysts warned the deal did not spell the end to Europe's problems.

"The euro zone still has growth issues even if we accept the Greek deal as enough to sustain financial stability and keep Greece in the European Union," said Tim Evans, an energy analyst for Citi Futures Perspective.

London's Brent crude settled at $109.87 per barrel, down 1 percent and back below the 100-day moving average of $110.61 and the 50-day moving average of $110.55.

U.S. crude fell 0.6 percent, finishing at $87.18 a barrel.

WHEAT SURGES ON WEAK CROP RATING

Front-month wheat futures in Chicago settled up 2.8 percent at $8.73 a bushel. The market set a two-week high of $8.73-1/2 after another record low rating for U.S. wheat crop conditions.

The U.S. Department of Agriculture said in a weekly crop progress report on Monday that the condition of the winter wheat crop has fallen again, continuing a series of lows struck this month amid persistent dry weather.

The USDA said the share of the U.S. winter wheat crop rated good-to-excellent fell to 33 percent due to dry conditions in the U.S. Plains, as the plants headed into winter dormancy.

While the ratings matching analysts' estimates, they added to concerns about dwindling global stocks, already stretched following weather disrupted seasons in the Black Sea region, and expectations that adverse weather will cut yields and quality in harvests in Argentina and Australia.

"The U.S. hard red crop is looking really poor," said Andrew Woodhouse, grains analyst at Advance Trading Australasia.

"The European market is running out of stock, the Black Sea is running out of stock and now, with the U.S. production profile going down, it is very supportive for wheat."

Corn and soybean futures also traded at their highest in about two weeks. Soy rose for the third straight session and corn for the second consecutive day, bolstered by month-end investment fund buying, analysts said.

Other crops that gained included soft commodities such as sugar and coffee.

Raw sugar futures edged higher in New York trading, consolidating below the 20-cent-per-lb level, as the market digested updates from Brazil where a strong tail end to the crop is capping the potential for price gains.

Arabica coffee futures were also firm in New York trade, consolidating above Monday's 2-1/2 year low, as ample supplies weighed.

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.