The oil price fell yesterday despite the significant weakening of the trade weighted dollar. The Brent front contract (for December delivery) trades currently even below 114 USD per barrel. The spread between that front contract and the six month futures contract (ICE), even after yesterday’s expiration of the November contract, remains very elevated and, we think, out of line with fundamentals. Therefore, we expect the forward curve to shift lower and flatten in the weeks ahead.
Precious Metals
The price of gold bounced off the monthly lows and gained nearly 0.75% on Tuesday. The gains were, however, dollar-driven by the US dollar (the euro hit monthly high). Following Moody’s confirmation of the Spanish rating overnight, the risk-on sentiment remains intact, allowing gold to eke out some modest additional gains.
Regarding the situation in Asia’s physical gold market, Reuters reports that demand softened after the price rebound from monthly lows below 1730 USD per troy ounce.