The killing of al-Qaeda leader Osama bin Laden may have been the catalyst for this week's slide in oil, the biggest exchange-traded commodity by value. Crude had surged as much as 25% this year as violence swept through northern Africa and the Middle East, disrupting 1.3 million barrels a day from Libya and raising concerns of shortages from the Persian Gulf. Since bin Laden's death was announced, traders shifted their focus to prospects of weaker demand.

Service Industries
Service industries in the U.S. expanded in April at the slowest pace in eight months, the Institute for Supply Management said May 4. Applications for jobless benefits jumped the most since August in the week ended April 30, the Labor Department said May 5. That was tempered by a report from the department a day later showing payrolls increased last month by the most since May 2010.

Factory orders in Germany, Europe's largest economy, unexpectedly dropped 4% in March, the Economy Ministry said May 5. The country's industrial production rose for a third time the same month, the ministry said the next day.

Central bankers also helped drive commodities lower last week by indicating their intention to cool growth to combat inflation. Rates rose in more than two-dozen countries this year, according to data compiled by Bloomberg.

'Extremely Alert'

European Central Bank President Jean-Claude Trichet said May 6 that policy makers are "extremely alert" on inflation after they raised interest rates on April 7, joining China, India, Poland and Sweden in seeking to control consumer prices with tighter monetary policy. Trichet said he may take further decisions on rates after new economic projections in June.

While every commodity tracked by the S&P GSCI fell last week, some rebounded May 6. Wheat futures rose 2% on the Kansas City Board of Trade as drought and flooding threatened crops in North America, Europe and Asia. Cocoa, cattle, zinc, gold, copper, nickel and soybeans also gained.

Lower prices also may spur more demand. Barclays, which told investors in a report May 6 to use the slump to buy, is forecasting shortfalls in production this year for copper, nickel, tin, lead, platinum and palladium. Rabobank expects demand to exceed output in corn and cotton, according to a report last month.

'Strong' Demand

"Ultimately, supply remains weak, and demand remains strong, and that's why they will eventually go higher," said John Stephenson, who helps manage $2.6 billion at First Asset Investment Management Inc. in Toronto. "Commodities, in the worst case, will start firming by late August, but in the meantime, I would see this as a buying opportunity."

Oil demand will exceed supply this year, the U.S. Energy Department said in a report April 12. Billionaire hedge-fund manager T. Boone Pickens said May 3 that prices will rise.