KBC Market Research Desk
KBC Bank
Crude
After soaring by more than 4% on Friday, the oil price fell by about a percent yesterday and the front-month contract on Brent thus returned below 65 USD/bbl. The move was probably driven mainly by the strengthening US dollar but market positioning ahead of this Friday’s OPEC meeting could also have played a role.
Regarding possible outcomes of the meeting, our expectations are in line with those of market and we do not expect any change in the cartel’s policy. Key members of the OPEC, namely Saudi Arabia and its Gulf allies, are likely to be happy with a swift reaction of US oil producers on the one hand and with relatively stronger growth of oil demand (vis-à-vis last year’s estimates) that has been spurred by low oil prices on the other. Let us recall that a combination of both factors led to about 13% increase in oil prices on a year-to-date basis.
Metals
Although base metals prices were on average only little changed yesterday, aluminium and nickel in particular grew quite strongly.
The metals more or less ignored China’s PMI which came out broadly in line with market expectations. The official index showed that growth in China’s factory sector edged up to a six-month high in May, but export demand shrank and jobs were shed. The headline index improved marginally, from 50.1 to 50.2. On the other hand, a private survey conducted by Markit showed a somehow more negative picture as the headline index remained at its flash estimate at 49.2 point. China’s PMI figures thus confirmed that risks for base metals prices remain tilted to the downside.
Chart of the day:
Brent vs DXY on 6/1/2015.a
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.
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