On Monday, Brent crude extended previous gains and the price of the front-month contract (ICE) rose in the fourth straight session. In the afternoon, the price surged by about 1 USD per barrel (USD/bbl) and therefore breached 116 USD/bbl level. Quite interestingly, the spread between the front-month and the second-month contract slightly increased despite the fact that Reuters reported that physical market in North Sea grades rather weakened. Regarding the ICE data on positioning in Brent futures/options, it showed a further increase in speculators’ net position to the highest level since early May.
As concerns news, Sudan and South Sudan are going to discuss joint border as well as oil-related export fees today. Let us recall that the countries have been in a dispute over payments for transporting oil from South Sudan to Sudan via a pipeline. Before the conflict broke out, both countries (oil-rich South Sudan in particular) had produced about 500 thousand barrels of oil per day (kbpd); now, the countries produce only about 100 kbpd (according to EIA).
Despite the fact that copper lagged behind its peers on Monday, the three-month contract (LME) gained about 0.8 percent, mainly on hopes for additional monetary stimulus in China. Recall that China’s PMI remained below the key 50 points level for the 10th consecutive month in August. In a response to a decline in economic activity, the People’s Bank of China has already cut interest rate by 56 bps and required reserve ratio by 1 percentage point so far this year.