COMMODITIES-Demand fears hit oil, metals prices

* Oil falls more than $1 on crude stock build

* Copper slides nearly 6 pct, gold loses 1 pct

* U.S. grains lower, Argentina outlook brightens

By Sue Thomas

LONDON, Jan 29 (Reuters) - Oil and metals prices fell on
Thursday as fears about falling demand, particularly from China,
and rising physical stocks dampened optimism arising from recent
winning streaks.

Grains also eased, as rains brightened the outlook for key
exporter Argentina, which is suffering its worst drought in 48
years.

Oil fell more than $1 towards $41 a barrel after data
showing a further build in crude stocks in the United States
piled on more evidence of falling demand for oil from the
world's largest fuel consumer. [O/R]

U.S. crude CLc1 fell $1.09 a barrel to $41.07 by 1246 GMT,
while London Brent crude LCOc1 lost 31 cents to $44.59.

But prices got some support from remarks by OPEC Secretary
General Abdullah al-Badri at the World Economic Forum in
Switzerland that OPEC would not hesitate to act again if the oil
price remains low. [ID:nWLA6191]

OPEC's output cuts since the second half of 2008, in
reaction to the fall of more than $100 in oil prices since July,
have also helped to put a floor under prices.

Copper MCU3 fell nearly 6 percent to $3,139 a tonne MCU3
after data showed London Metal Exchange stocks rose by the
biggest daily amount since August 2004 to the highest since
November 2003. [MET/L]

The metal used in power and construction and a key gauge of
economic activity was trading at $3,198 a tonne at 1040 GMT on
the LME compared with $3,330 at the close on Wednesday.

Comments by China's Premier Wen Jiabao at the World Economic
Forum that the country's economy had been hit hard by the global
financial crisis intensified fears about demand. [ID:nLS373881]
China is the world's largest consumer of copper.
"Many people were secretly hoping that China would pull the
rest of the world out of this current situation. China is saying
that's not possible," said David Wilson, analyst at Societe
Generale.

CURRENCY HEDGE

Gold prices gave up another 1 percent on Thursday, extending
the losses of the two previous sessions, as a firmer dollar
curbed buying of the precious metal as a currency hedge. [GOL/]

It also lost its edge due to waning interest in bullion as a
haven from risk and a resurgence of demand worries after Indian
gold imports plunged 90 percent in January.

Spot gold XAU= slid to $878.10/880.10 an ounce at 1021 GMT
from $885.60 in New York late on Wednesday. The precious metal
has fallen 4 percent from the more than three-month high of
$915.30 it hit on Monday.

"After a pretty impressive run last week we saw profit
taking when gold failed to break through $920 an ounce,"
Commerzbank senior trader Michael Kempinski said. "After the
rally in stock markets, people are thinking twice about taking
in more gold at these higher levels."

The dollar climbed overnight as investors took heart from
U.S. Congress' headway on a $825 billion stimulus package.
[ID:nSP417718] European shares fell, after gains earlier this
week, dragged down by commodity and banking stocks. [.EU]

U.S. grain futures edged lower as the market awaited further
weather updates from Argentina. [GRA/] Thunderstorms brought
rain to some parts of Argentina on Wednesday with further storms
forecast in areas including the key crop region of Cordoba.

Chicago Board of Trade corn for March delivery CH9 was
down 1.63 percent at $3.78-1/4 per bushel by 1212 GMT, while
March soybeans dropped 0.71 percent to $9.76 per bushel. Wheat
for March delivery lost 1.47 percent to $5.86-1/4 per bushel.

In Europe, milling wheat futures eased in line with CBOT
futures.

In a rare bright spot for commodities, cocoa prices in
London set a new 24-year peak while arabica coffee looked to
consolidate after its recent climb to the highest levels in
nearly four months as a Reuters poll saw prices up this year.

Arabica coffee prices are forecast to rise 20 percent by the
end of 2009, while robusta may jump 18 percent, spurred by a
drop in global output and tighter stocks, a Reuters poll showed.
[ID:nSP229639]

But raw sugar futures eased as producer selling pulled
prices back from a four-month high set earlier this week and
India deferred a cabinet decision on whether to cut or eliminate
import duty.
(Reporting by Pratima Desai, Jan Harvey, Michael Taylor and Joe
Brock in London, Valeria Parent in Paris and Bruce Hextall in
Sydney; Editing by Peter Blackburn)