The oil price seems to have stabilized in recent days

Crude

Although being set to decline in the fifth consecutive week, the oil price seems to have stabilized in recent days as the price of the front-month contract on Brent mostly remained in a relatively narrow two dollar band. Although US data on crude and products inventories unveiled that crude inventories fell quite sharply last week, the support for oil prices was eventually only limited. As regards the impact of yesterday’s US GDP estimate, a somehow mixed report rather weighed on prices, mainly via the strengthening US dollar.

Regarding the comments of OPEC Secretary General Badri, though he provided a relatively optimistic view of the market due to expectations of rising oil prices, his comments also suggested that the OPEC is likely to maintain its current policy of high oil production. This represents a negative risk for the oil price for the following quarters, especially due to the possibility of higher oil production in Iran.

Metals

With concern about an official rate hike in the US and in particular about the slow growth of Chinese demand, the price of copper has fallen to its lowest level since the crisis year of 2009. Although we anticipate a significant year-on-year decline in copper prices this year, we consider July’s fall as too strong, and therefore the price of copper might tend to grow in the months to come.

We believe that the affect of the drop in China’s stock markets on the real economy and consequently on demand for copper, will not be very strong. In addition, data for nearly the entire first half of the year indicates a deceleration of growth in the production of refined copper (compared to the end of last year), and thus the final market balance may be a lower surplus than we expected. On the other hand, the risks of our forecast are skewed towards a price decline.

Chart of the day:

Although being set to decline in the fifth consecutive week, the oil price seems to have stabilized in recent days...