On Monday, the front-month contract on Brent
was trading in a relatively narrow range between 114 and 115 USD
per barrel (USD/bbl). Although the refinery margins remain healthy, backwardation in the short-end of Brent
forward curve (ICE) remains rather modest (in comparison with the situation a month ago) and thus indicates relative favorable supply-demand conditions.
Regarding the recent call of G7 officials for increase oil production, Saudi Arabia’s oil minister said Naimi said that the kingdom was ready to meet any demand from its customers and added that the recent surge in prices was not driven by market fundamentals. Recall that Saudi Arabia significantly boosted its oil production in June 2011 and since then its average monthly production has been about 9.8 million barrels per day (according to EIA). Base Metals
Base metals posted further strong gains on Monday and on average strengthened by nearly 2 percent. LME aluminium
thus hit a new four month high whereas the three-month copper
settled above 8000 USD
per ton (USD/t) level for the first time since early May.
With respect to the fact that the fundamental situation has not materially changed, we think that the room for further strong gains of copper
(in particular) is at this point rather limited. Apart from yesterday’s weaker than expected data on imports and exports, today’s official data showed that aluminium
production in China hit a record high in August.