Crude
A fresh round of tensions between Russia and the West as well as clashes in eastern Ukraine and talks about possible presence of US soldiers in the country have so far had no significant impact on the price of oil. The front-month contract on Brent has been trading sideways in the past three weeks and yesterday settled just shy below 102.50 USD/bbl.
Although geopolitical tensions remain high in general (Ukraine, Libya, Syria/Iraq, Israel, …), their oil market impact is – at least for the time being – quite small. In a combination with relatively strong supply in Atlantic basin and muted demand (despite quite strong pick-up in ARA refinery margins over the past couple of weeks), they do not generate more significant upside pressure on oil prices. At the same time, however, we think that the existence of the risks limits room for further decline in oil prices below 100 USD/bbl level.
Base Metals
Generally higher risk aversion apparent for example on equities’ prices weighed on commodities yesterday; the three-month copper price (LME) fell well below 7000 USD/t yesterday and hit a five-day low while aluminium price fell by about 0.2%. Today in early trading, however, aluminium is trading at a new 1-1/2 year high.
Regarding copper, although we remain bearish towards the year-end and in the medium term due to combination of several factors (slowdown in Chinese demand growth, accelerating supply), we are a bit cautious as concerns expectations of more significant decline in prices for the weeks ahead as LME stocks of the metal remain in sight of six-years low. Persisting tightness in LME market is also signalled by backwardation in the front-end of the forward curve (cash-3M spread has been mostly trading above zero since mid December last year).
Chart of the day:
Oil has been trading sideways in the past three 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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