Although the most of commodities saw rather a calm session on Friday, the price of oil fell sharply. US light sweet oil (WTI) shrunk by almost four percent, whereas the global benchmark Brent (ICE) lost “only” about 2.5 percent. Still, both Brent and WTI prices fell by more than 5 percent in one week.
Apart from the jitters ahead of elections in Greece and France, the US payrolls report surprised on the downside of expectations. Moreover, Reuters cited some trading sources who said that confusion over new trading rules for futures trading (higher initial margins for speculators) at NYMEX and ICE might have played a role. The new rules should have taken effect as of today but exchanges were granted a 90 days postponement.
Today in early trading, Brent fell further and even dipped below 111 USD per barrel (USD/bbl) level. However, it has gained some ground back and at the time of writing is seen at 112.50 USD/bbl.
Base Metals
LME copper edged about 0.6 percent lower on Friday and thus returned below 8200 USD per ton level and physical premium also slightly eased although the stocks of the red metal at LME fell further. Recent surge in prices probably attracted some speculative demand - according to the CFTC Commitment of Traders report, the net speculative position in copper (COMEX) rose significantly last week.
However, we think that the risks for the price of the red metal are skewed to the downside (we have estimated 8050 USD/t average in Q2/2012), especially given the uncertainty stemming from the results of elections in Greece. The outcome might be more a source of instability as its impact for the policy of the EMU as a whole won’t be out of the way anytime soon.