Despite the fact that the front-month contract on Brent was seen as low as at 102.5 USD per barrel (USD/bbl) level in intraday trading, it closed barely changed at 103.4 USD/bbl. Meanwhile, backwardation in the front end of the forward curve slightly deepened.
Today in early trading, Brent is hovering around 103.20 USD/bbl and for the time being largely ignores weaker than expected outcome of Germany’s Ifo index. Later today, the EIA will release report on US oil inventories. However, we do not expect any strong reaction. The market will more likely focus on further development in the euro zone which, in our view, poses rather downside risks for the price of oil. Therefore, we maintain our view that the front-month contract on Brent (ICE) might return to 100 USD/bbl in sessions ahead.
Precious Metals
The price of gold slightly rose on Tuesday and today in early trading even tested 1590 USD per troy ounce level. As we already pointed out, we perceive further development of the price of gold as a function of decisions of major central banks, and above all, the Fed.
The WSJ reported today that the debate among Fed’s FOMC members “turned to the question of how and when”. With regard to the next week’s meeting, we think that it will not bring the final decision and we are therefore sceptical about the possibility of further significant gains of the yellow metal in sessions ahead.