Oil regained some ground yesterday

ANALYSIS | 05/29/2015 11:01:47 GMT

Crude

After falling on Tuesday and Wednesday, oil regained some ground yesterday. Despite being under pressure early in the session, the price of the front-month contract on Brent increased by about 0.8%, mainly in a response to US crude inventories & products data.

The data showed that US crude inventories fell more than expected last week (-2.8 million barrels vs. expected -0.9 million barrels). Though the decline in stocks could be to some extent attributed to a lower volume of imports, a relatively sharp decline in gasoline stocks is quite surprising as refinery capacity utilization increased last week. This suggests a strong demand for gasoline at the start of this year’s driving season which reflects, among others, lower oil price.

Metals

After falling for ten straight sessions and hitting a fourteen-month low, the aluminium price rebounded yesterday. Although we expect more balanced aluminium market this year (in comparison with recent past) and therefore expect the price of the metal to increase towards the year-end, figures for the first quarter suggest that risks for our view are skewed rather to the downside.

It is probably not surprising that the key risk is further development in China; not only because of its huge share on total world consumption of the metal, but also due to the soaring metal production (in the first three months, production of aluminium increased by about 30%). Growth in China’s production more than offsets a sharp production decline elsewhere in the world, particularly in the Russia, US and South Africa.

Chart of the day:

After falling for ten sessions in a row, the aluminium price rebounded yesterday…

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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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