Concern about rising inventory levels plus hawkish comments from Central banker Charles Plosser sent crude oil futures to two-month low on Tuesday.

Crude oil for November delivery fell 56 cents at $91.37 a barrel on the New York Mercantile Exchange, the weakest settlement since the start of August.

Futures skidded to an intra-day low of $91.10 a barrel in late trading after Federal Reserve Bank of Philadelphia President Charles Plosser criticised the Fed's new bond buying programme and added that the central bank may increase interest rates before the current mid-2015 target.

Plosser argued that the latest bout of quantitative easing was not necessary and may not even work. In a speech to financial market trade groups in Philadelphia, the president of the Philadelphia Fed Bank said: "We are unlikely to see much benefit to growth or employment from further asset purchases."

Meanwhile traders looked ahead to the Energy Information Administration's inventory data due on Wednesday. Crude oil stocks are currently almost 12% above the five-year average and this week's data is expected to show crude oil stocks rose a further 1.6m barrels. Last week's bigger than expected increase in stockpiles sparked heavy selling in oil futures.

The strong dollar also put pressure on commodity prices on Tuesday as it makes oil more expensive for holders of other currencies.

Elsewhere gold tapped into a modest 0.1% gain following reports of gold purchases by central banks.

Gold for December delivery increased $1.80 to settle at $1,766.40 an ounce on the Comex division of the New York Mercantile Exchange.

Central banks of Russia, South Korea, Turkey and Kazakhstan were all reported to have boosted their gold reserves recently.

Demand for gold was also lifted by upbeat data on the US housing market. The S&P/Case-Shiller 20-city composite index showed US house prices increased 1.6% in July, a two year high.



CJ

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