The price of Brent oil fell significantly in the last two weeks, and even temporarily traded below US$110 per barrel (after breaking through a 100-day average). The main reasons for the falls included the nervousness ahead of the commencement of the automatic budget cuts in the United States, the surprising and ambiguous outcome of the Italian general election, and the worse-than-expected data on February’s business mood in China. The temporary interruption of the Forties oil production in the North Sea and the problems in the Brent pipeline system did not encourage the price very much either. The result was just a temporary increase of the spread between the prices of nearest-maturity contracts, which hit three-week highs. Lower demand for physical oil (despite the persisting decent refining margins) outweighed those effects and kept the prices of CFD contracts (short-term swaps for physical oil) low. The ICE data from the market in futures contracts for Brent was again interesting, as it indicated that speculators were placing much lower bets on another increase in oil prices. Their net position in futures contracts for Brent fell by nearly 30,000 contracts last week (much the same as in respect of WTI oil), with long positions having dropped, while short positions increased significantly. However, short positions still remain below the average from a historical perspective.
Prices of base metals fell significantly, by almost 5% on average, in the last two weeks. While the copper price (LME) was down by 3.5%, the three-month aluminium contract went down by a huge 6.3%. Base metals were surprisingly strongly affected by China’s slightly worse business mood data for February, indicating that the business mood declined vis-a-vis January and stopped closely above 50 points. The prices of both copper and aluminium dropped below 200-day averages after the release. Recently, copper prices have not even been encouraged by the data on copper production, which indicates a strong increase in the last quarter of 2012. For 2012 as a whole, the global refined copper production rose by 580,000t, largely owing to China (consistent with this are higher imports of ore and concentrates). China’s share of the global copper production was 28.5% last year.