KBC Market Research Desk
KBC Bank
Crude
Today in early trading, the oil price continues to slide and at the moment of writing of this note is seen at 65.6 USD/bbl. The market has however lately missed any stronger impulses that would either support or undermine the price. For example, yesterday’s sharp reversion of early gains suggests that room for prospective further gains of Brent is rather limited. This has also been suggested by the latest ICE Commitment of Traders report. Although the net speculative position in Brent futures declined, the report also showed that number of traders betting on the price decline fell quite sharply over the past two weeks (see the chart below). This in our view suggests that the risks for oil price are tilted rather to the downside.
As we already pointed out before, we perceive the recent oil rally as a bit premature. Moreover, any period of higher oil prices (such as the current one) alleviates the pressure on producers (for example in the U.S.) which suggests that the period of lower oil prices (below 60 USD/bbl) may in fact last longer than we previously thought.
Metals
Base metals prices were under a modest pressure on Monday and on average fell by 0.7%. This time, aluminum underperformed its peers and the three-month LME contract price fell by 1.7% while the price of copper fell by about 0.6%.
Regarding the latter, data for the first two months of this year suggest that the overall balance of the market continues to improve which is in line with our scenario (we expect the price of copper to gradually decline in the rest of this year). On the other hand, clear attempts of China’s authorities to tackle the slowing economic growth pose a risk to that view.
Chart of the day:
Number of traders betting on oil price fell sharply in the last two 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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