On Thursday, Brent crude erased some previous losses and outperformed the rest of major commodities as the market was hit by news that production problems in North Sea would take a few days more to resolve. Thus, Brent gained nearly 3 USD per barrel (USD/bbl) in the afternoon. The most of the action occurred in the front-end of the forward curve (ICE) and the spread between the front-month and three-month contract hit the highest level since mid August. Despite yesterday’s rally, Brent is set to post the largest weekly drop in price since the end of June.
Base metals prices fell across the board on Thursday and therefore retreated further from multi-month highs hit in previous sessions.
As far as fundamentals are concerned, yesterday’s data on China’s and European PMI confirmed that the demand for the metals might rather weigh on prices in months ahead. On the other hand, we think one should bear in mind a reaction of base metals prices on previous rounds of quantitative easing - both in 2009 and 2010, base metals prices strongly benefited from more favourable liquidity conditions. Hence, a fresh round of easing across the world might counterweigh (or even outweigh, for example in case of copper) weak fundamentals in months ahead.