Crude
The price of Brent increased the most in the last seven sessions yesterday as news about continuing drawdown of stocks in the US supported oil prices in general (WTI is set to post gains in the tenth consecutive week); US commercial crude inventories have been falling in the last three weeks, but from month-on-month perspective, the decline in May has so far been quite small (and therefore broadly in line with seasonal pattern – see the chart below). Moreover, let us recall that the stocks have been falling from their all-time record highs. News from Middle East could also have supported the price but we perceive the impact as rather negligible due to generally calm situation in the markets (BFOE CFD curve has been in permanent contango since July last year).
As we already pointed out, we believe that the latitude for a possible increase in oil prices is limited and we still expect the price of oil to fall rather than rise.
Metals
While base metals prices declined on average yesterday, the price of copper increased even though China’s flash PMI estimate for May (HSBC PMI) came out slightly weaker than expected.
As for our view on copper market, we again expect that copper consumption, respectively the rate of its growth, will be a crucial factor for the global copper market this year. China in particular will play an important role in this regard. Its GDP growth rate has been visibly decelerating in recent quarters, and not even soft indicators have signalled a turnaround recently. On the other hand, copper imports remain relatively high compared to last year in spite of the deceleration. Hence the impact of the monetary easing by the People’s Bank of China continues to pose a risk, just like the impact of the other growth-stimulating measures taken by Chinese authorities. Nevertheless, we anticipate a gradual decline in the price of copper in the quarters to come. This should go hand in hand with the rate of improvement of demand for the metal, which is lagging behind its supply.
Chart of the day:
US oil inventories have declined in the last 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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