The oil price settled barely changed yesterday

Crude

The oil price settled barely changed yesterday even though the International Energy Agency (IEA) said it revised its outlook for both 2014 and 2015 oil demand growth to the downside. The agency thus echoed similar comments of the US Energy Information Agency (EIA). The EIA even said that “[t]he recent slowdown in demand growth is nothing short of remarkable”.

Both agencies also mentioned that Libya’s recent rebound in oil production and exports contributed to decline of Brent price. This is slightly surprising as the country’s government had difficulties to reach a deal with anti-government rebels from the eastern part of the country. Moreover, despite the fact that security situation in Libya has worsened dramatically over the past couple of months, the country’s PM said on Wednesday that oil production is expected to reach 1 million barrels per day in October.

Let us recall that favorable fundamentals are illustrated by contango in the front-end of Brent forward curve. A spread between the front-month and six-month contract is seen at the lowest level since June 2010 and has been negative for the longest period of time since 2010. A combination of recent increase in Libya’s oil production with weaker than expected oil demand thus pose a clear downside risk for our oil price forecast for the rest of this year.

Base metals

Copper price fell quite sharply over the past couple of days and the red metal is heading for the biggest weakly loss since mid July. Apart from prospects of faster supply growth in the rest of the year, copper price and base metals in general have been under pressure of strengthening US dollar.

In the meantime, aluminium price has been falling as well this week and is set to post loss for the first time in four weeks.

Chart of the day:

IEA said yesterday it revised its forecast for global oil demand growth for both 2014 and 2015 and hence echoed similar comments of the US EIA. The chart shows that - with the exception of July – global commerical oil inventories have been rising over the past couple of months.