Oil, Metals, Crops Fall on Concern U.S. Bailout Plan May Fail

Commodities fell, led by oil, copper and lead, on concern the U.S. plan to spend $700 billion propping up America's banks will fail to unlock credit markets and avert a slowdown in the world's largest economy.

Crude, gasoline, heating oil, copper, lead, corn, soybeans, silver and rice all dropped more than 2 percent, leading the S&P Goldman Sachs Commodity Index to a 3.2 percent decline. While U.S. Treasury Secretary Henry Paulson and leaders in Congress reached an agreement giving the government the authority to buy distressed bank assets, short-term interest rates failed to decline in Asia and Europe as banks restricted lending.

Crude oil for November delivery declined as much as $4.61, or 4.3 percent, to $102.28 a barrel in electronic trading on the New York Mercantile Exchange. The contract was at $102.88 a barrel at 12:33 p.m. in London.

Gold for immediate delivery fell as low as $867.83 an ounce, trading for $883.58 at 12:34 p.m. in London.

Silver for immediate delivery declined 2.6 percent to $12.95 an ounce. Lead for delivery in three months declined $55, or 2.7 percent, to $1,960 a ton.

The dollar strengthened as much as 2.1 percent against the single European currency, the most since Aug. 8, and traded at $1.4355 as of 11:50 a.m. in London.

A stronger dollar makes commodities more expensive for buyers outside the U.S., potentially weakening demand.

U.S. fuel demand averaged 19.5 million barrels a day during the past four weeks, the lowest since October 2003, the Energy Department said in a Sept. 24 report.

TradingEconomics.com, Bloomberg.com
9/29/2008 5:10:43 AM