KBC Market Research Desk
KBC Bank
Crude
A fresh round of tensions between Russia and the West as well as clashes in eastern Ukraine and talks about possible presence of US soldiers in the country have so far had no significant impact on the price of oil. The front-month contract on Brent has been trading sideways in the past three weeks and yesterday settled just shy below 102.50 USD/bbl.
Although geopolitical tensions remain high in general (Ukraine, Libya, Syria/Iraq, Israel, …), their oil market impact is – at least for the time being – quite small. In a combination with relatively strong supply in Atlantic basin and muted demand (despite quite strong pick-up in ARA refinery margins over the past couple of weeks), they do not generate more significant upside pressure on oil prices. At the same time, however, we think that the existence of the risks limits room for further decline in oil prices below 100 USD/bbl level.
Base Metals
Generally higher risk aversion apparent for example on equities’ prices weighed on commodities yesterday; the three-month copper price (LME) fell well below 7000 USD/t yesterday and hit a five-day low while aluminium price fell by about 0.2%. Today in early trading, however, aluminium is trading at a new 1-1/2 year high.
Regarding copper, although we remain bearish towards the year-end and in the medium term due to combination of several factors (slowdown in Chinese demand growth, accelerating supply), we are a bit cautious as concerns expectations of more significant decline in prices for the weeks ahead as LME stocks of the metal remain in sight of six-years low. Persisting tightness in LME market is also signalled by backwardation in the front-end of the forward curve (cash-3M spread has been mostly trading above zero since mid December last year).
Chart of the day:
Oil has been trading sideways in the past 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.
Recommended Content
Editors’ Picks
EUR/USD holds above 1.0700 after German inflation data
EUR/USD trades modestly higher on the day above 1.0700. The data from Germany showed that the annual HICP inflation edged higher to 2.4% in April. This reading came in above the market expectation of 2.3% and helped the Euro hold its ground.
USD/JPY recovers above 156.00 following suspected intervention
USD/JPY recovers ground and trades above 156.00 after sliding to 154.50 on what seemed like a Japanese FX intervention. Later this week, Federal Reserve's policy decisions and US employment data could trigger the next big action.
Gold holds steady above $2,330 to start the week
Gold fluctuates in a relatively tight channel above $2,330 on Monday. The benchmark 10-year US Treasury bond yield corrects lower and helps XAU/USD limit its losses ahead of this week's key Fed policy meeting.
Week Ahead: Bitcoin could surprise investors this week Premium
Two main macroeconomic events this week could attempt to sway the crypto markets. Bitcoin (BTC), which showed strength last week, has slipped into a short-term consolidation.
Five Fundamentals for the week: Fed fears, Nonfarm Payrolls, Middle East promise an explosive week Premium
Higher inflation is set to push Fed Chair Powell and his colleagues to a hawkish decision. Nonfarm Payrolls are set to rock markets, but the ISM Services PMI released immediately afterward could steal the show.