The oil price barely moved on Monday

Crude

The oil price barely moved on Monday. The absence of US investors clearly contributed to the calmest session since early January. Moreover, market paid no attention to lack of agreement between Greece and its creditors nor it was distracted by news about Egypt’s and Libya’s air strikes against the Islamic State (IS) which suggest that risks in the Middle East may be on a rise.

In fact, IEA’s Chief Economist Birol said today that the rise of the IS may undermine necessary investment in oil production needed to keep the market balanced in the next decade. Though the market is well supplied at the moment (or, actually, even better than well supplied) thanks to, among others, US “shale oil” production, Birol’s comments reflect the fact that spending on new projects in Middle East countries is needed to keep the oil market balanced over the long-term.

Birol’s comments support the oil price in early trading today. The front-month contract on Brent is trading above 62 USD/bbl at the time of writing of this note. Nevertheless, as we already pointed out, we think that the recent increase in prices may prove to be short-lived and we still expect oil prices to be under pressure, at least in the short-term.

Metals

Base metals prices are under modest pressure on the eve of the beginning of a week-long Lunar New Year holiday in China; price of the three month contract on copper (LME) is down by about 0.7% and aluminium by about 0.2%. Regarding the latter, news that aluminium stocks at Japan’s ports hit a record in January may add some downward pressure on the price today. As for yesterday’s session, weaker than expected growth of Japan’s economy (which is World’s no.4 consumer of copper and no.5 consumer of aluminium) had only a small impact on prices.

Chart of the day:

Oil experienced an unusually calm session yesterday