Crude
Brent crude posted yet another gains on Wednesday and in late afternoon was seen just shy of 118 USD per barrel (USD/bbl). The situation in Iran has somehow calmed (although Iran’s stance towards EU embargo and the U.S. sanctions remains unclear) and this week’s rally was fuelled mainly by supply worries related to South Sudan and Nigeria. Let us remind that Nigeria is a major OPEC producer (about 2 million barrels per day) and South Sudan pumps about 350 thousand barrels of oil per day. Therefore, the spread between 1M and 2M contract slightly widened (see the chart).
Regarding yesterday EIA’s data on U.S. crude inventories, it showed much lower increase than expected. This also bolstered the price of oil yesterday. Beside that, a preliminary data on total product supplied (proxy for demand) unveiled further (counter seasonal) decrease in the first week of February. Hence, demand for products remains well below medium-term average.
Base Metals
Copper posted solid gains on Wednesday and in intraday trading breached 8600 USD per ton (USD/t) level.
Today, the red metal extends gains even though it dropped even below 8500 USD/t after China’s data on inflation for January had been released. China’s annual rate of inflation rose unexpectedly in January, breaking a five month softening trend. CPI inflation spiked up from 4.1% Y/Y to 4.5% Y/Y as spending jumped during the Chinese Lunar New Year holiday season. At the time of writing, LME 3M copper is hovering at 8615 USD/t.
Chart of the day:
Brent 1M – 2M timespread at the highest level since the end of 2011.
