Oil prices and industrial metals fell on Tuesday as concerns that an environment of higher inflation and the subsequent central bank response could threaten the economic recovery and therefore demand for industrial commodities.
Crude prices initially dropped more than 1% on Tuesday, extending the losses of more than 2% seen on Monday after the heaviest day of selling on global stock markets in more than six years.
Sell-off hits oil
"Oil has been unable to avoid the global market sell-off, with ICE Brent trading to levels last seen in early January," said Hamza Khan, head of commodities strategy at ING.
"Given the amount of speculative money in the oil market at the moment, it shouldn’t come as too much of a surprise that the more recent risk averse move from global investors has put pressure on the oil market."
Indeed, data released by the Commodity Futures Trading Commission on Friday showed that energy market speculators pushed up their bullish net positions in Nymex WTI futures to a fresh record high last week - a fourth week of new records.