The oil price got under a modest pressure today in early morning

Crude

The oil price got under a modest pressure today in early morning as China’s PMI flash estimate for March surprised significantly to the downside and Saudi Arabia said that its oil production is close to 10 million barrels per day. Moreover, Saudi’s oil minister Naimi said that his country is willing to supply even more oil if needed. The latest comments thus confirm that the kingdom sticks to its policy announced in November last year and is not willing to give up its market share in favor of other producers.

Regarding news, CEO of Schlumberger – one of major oilfield service companies – said that a sharp decline in oil prices could have a permanent effect on US shale oil producers in a sense that oil producers would be more prudent while investing into new production capacities. Let us recall that, according to the latest EIA Drilling Productivity Report, oil production may slightly decline in three major US shale oil producing regions as soon as in April as a result of slumping number of active rig count and high decline in oil production from legacy wells.

We believe that factors mentioned above support our scenario that bets on a decline in oil prices in months to come and their recovery above current levels towards the end of this year.

Metals

After hitting a nearly four-month high in early morning, the price of copper (LME 3M) got under modest pressure after the release of flash estimate of China’s PMI. After having expanded in February, the Chinese manufacturing sector fell back into contraction in March as new orders shrank. The HSBC manufacturing PMI dropped from 50.7 to 49.2, its lowest level in 11 months, while only a marginal decline was expected.

Although base metals prices are traditionally sensitive to any signs of slowing demand in China, the impact of worse than expected PMI has so far been rather limited as market probably bets on an introduction of pro-growth measures should the prospects of China’s economy further deteriorate.

Chart of the day:

Copper price hit a nearly four-month high today in early trading

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