Copper Futures Tumble After Squeeze Fails to Develop
Undated (AP) _ Copper futures prices fell sharply Tuesday on New York’s Commodity Exchange after an expected rally linked to the expiration of copper options in London failed to materialize.
On other commodity markets, precious metals, energy futures, grains and soybeans, and livestock and meat futures all were mixed.
Copper futures settled 2.35 cents to 3.95 cents lower in Chicago with the contract for delivery in September at $1.30 a pound.
The September contract traded as low as $1.282 a pound during the session, following a sharp decline on the London Metal Exchange that analysts attributed to disappointed selling by traders who had expected strong gains.
Those expectations stemmed from perceptions that a ″squeeze″ or partial corner of the copper market was developing in London, where options on September copper deliveries are nearing expiration.
But analysts said it became apparent Tuesday that the squeeze play had fizzled, prompting many traders who had bet on higher prices to exit the market.
″They all started liquidating because it wasn’t going up,″ said Susan Kashan, a copper trading assistant with PaineWebber Inc. in New York.
She said selling accelerated when the heavily traded December contract hit $1.23 a pound, 4.75 cents below Monday’s settlement. December copper fell as low as $1.217 before bouncing back to end at $1.24.
William O’Neill of Merrill Lynch said copper’s supply-and-demand factors remain bullish, although the market has fallen substantially since the spot price represented by the September contract reached a 12-month high of $1.384 a pound on Sept. 12.
O’Neill said Tuesday’s action was typical.
″We hear talk all the time of these types of squeezes, both in London and New York,″ he said. ″Normally the fears are exaggerated and this is such a case.″
Gold futures fell moderately on the Commodity Exchange, ending a five-day rally amid selling that O’Neill attributed to a lack of significant developments in the Persian Gulf.
Gold settled $1.40 to $1.90 lower with September at $387.60 a troy ounce; silver was 2.4 cents to 2.8 cents higher with September at $4.79 a troy ounce.
Near-term crude oil futures ended modestly lower on the New York Mercantile Exchange while contracts for deferred deliveries rose. The pattern was similar in the gasoline market but heating oil futures advanced strongly.
Some of the action reflected positioning ahead of the American Petroleum Institute’s weekly stocks report, which was released after the close.
The report showed a larger-than-expected decline in U.S. supplies of crude oil and an unexpected increase in gasoline stocks. Heating oil supplies rose, as expected.
Light sweet crude oil futures settled 22 cents lower to 53 cents higher with October at $33.41 a barrel; heating oil was 1.12 cents to 1.44 cents higher with October at 86.43 cents a gallon; unleaded gasoline was .22 cent lower to .81 cent higher with October at 91.61 cents a gallon.
Soybean futures rose moderately on the Chicago Board of Trade, recovering most of the ground lost in the previous session amid talk of possible frost in the Midwest early next week.
Most corn futures also advanced but wheat futures retreated slightly.
Wheat futures settled 1/2 cent to 1 1/2 cents lower with September at $2.59 1/2 a bushel; corn was 1/2 cent lower to 1 1/4 cents higher with September at $2.37 a bushel; oats were 1 1/2 cents higher across the board with September at $1.10 3/4 a bushel; soybeans were 1 3/4 cents to 7 cents higher with September at $6.22 1/2 a bushel.
Livestock and meat futures ended mixed on the Chicago Mercantile Exchange ahead of Wednesday’s monthly Agriculture Department cattle-on-feed report.
The report is expected to show about a 4 percent increase over a year ago in the number of cattle on feedlots in the seven largest producing states.
Live cattle settled unchanged to .20 cent higher with October at 79.47 cents a pound; feeder cattle were .20 cent lower to .08 cent higher with September at 89.25 cents a pound; live hogs were .05 cent lower to .47 cent higher with October at 53.47 cents a pound; frozen pork bellies were .13 cent lower to .17 cent higher with February at 56.82 cents a pound.