Commodities prices shrunk on Friday as a risk sentiment worsened. Later in the afternoon, the oil price hit two-week low. Meanwhile, the backwardation in the short-end of the curve slightly heightened after the news that the restart of oil production at Buzzard field will be further delayed (Buzzard is expected to be back online on Oct 23rd). We think that the price of oil might fall towards 100 – 105 USD per barrel (USD/bbl) range in weeks ahead after the maintenance season in North Sea is over.
Regarding the latest CFTC Commitment of Traders (CoT) report, it showed a small increase in speculative net position in WTI futures and options. More importantly, the report unveiled a sharp increase in speculators’ bets on increase in heating oil price which results from the fact that stocks of distillates are below average on both sides of the Atlantic. Market tightness has fuelled the rally in the short-end of gasoil forward curve (ICE) - the spread between 1M and 2M contract hit the highest level since early November 2011.
Base metals prices fell across the board on Friday and on average lost more than 2 percent. The price of the three-month contract on aluminium (LME) thus fell below 2000 USD per ton (USD/t) level while copper price was seen a touch above 8000 USD/t later in the afternoon.
Quite interestingly, the CoT report showed a small increase in speculator’s net position in copper (COMEX) although the number of traders taking the long position fell by about 15 percent in the past two weeks.
Chart of the day:
The price of gold hit a six week low on Friday.