KBC Market Research Desk
KBC Bank
Crude
Price of the front-month contract on Brent bounced off a three-month low in Mid July and since then has been relatively stable in a narrow range between 106.8 and 108.6 USD/bbl as a new round of geopolitical tensions loomed and prevented further decline in prices. Yesterday, the oil price fell slightly even though fighting in Libya is reported to be the worst in years and geopolitical tensions elsewhere have even intensified (Russia vs. the West) or remained broadly unchanged (Iraq, Syria) over the past few weeks.
Although the overall situation in the market remains fairly stable as far as crude production is concerned, heightened geopolitical risk and related higher risk premium will probably prevent the oil price from drifting significantly lower in weeks to come.
Base Metals
With the only exception of nickel, base metals prices have increased over the past four weeks. In some cases, the price growth has been - exceeding 5% - relatively strong. Prices of both aluminium and copper remain high with respect to their recent histories – aluminium price remains in sight of a 17-month high while copper price stays well above 7000 USD/t level.
Although market has seen cuts in global smelting capacity due to persistently low prices in case of aluminium and while LME inventories of copper have declined sharply this year (as China’s imports of the metal increased - the question however remains whether the surge in imports in the first half of the year reflects higher manufacturing demand or if the metal sits in warehouses and could flow back into the LME storage system), we remain sceptical about possible further increases in prices of both metals.
Chart of the day:
Number of money managers holding long position in Brent futures fell sharply over past few weeks.
This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.
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