Oil price fell quite sharply

Crude

The oil price is set to decline for the fourth week in a row. On Wednesday, the oil price fell quite sharply after the release of a weekly report on US crude and product s inventories. The report showed an unexpected build in crude oil inventories. Moreover, quite significant increase was recorded also in Cushing (WTI delivery point) despite the fact that both US and US Midwest refinery utilization increased last week. On the other hand, the report showed that gasoline inventories fell quite sharply which indicated that demand for gasoline in the US remains strong. The decline in gasoline inventories never the less only mitigated overall bearish tone of the report.

The question however remains, as was already pointed out by the International Energy Agency, what will happen with oil prices after US driving seas on ends in September. Though demand for gasoline is likely to remain strong er compared to the previous years as cheaper oil spurred some demand, seasonally lower demand will likely weigh on gasoline prices which could consequently undermine prices of oil. The strong US demand for gasoline compared to that for diesel already has consequences for prices of oil products in NW Europe – this summer, a spread between gasoline and diesel prices h its the record levels since at least 2003.

Metals

Pressure on metals prices has been further mount ing this week. Early today, the flash estimate of China’s PMI for June fell significantly short of market expectations, which only supports worries about the “ true state ”of Chinese economy. In case of aluminium, whose price is seen at the lowest level since 2009 (see the chart below), somehow bleak demand picture is accompanied by quickly rising Chinese production of the metal .

Moreover, market jitters have intensified as the time of the first Fed hike in years seems to have been approaching. This also has a negative impact on gold; price of the yellow metal declines sharply this week and unlike previous cases, the decline spurred more significant demand response neither in China nor in India . Physical premiums in both countries remain quite low and thus do not indicate more significant demand pressures.

Chart of the day:

The price of aluminium fell to the lowest level since 2009 .

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