On Monday, the oil price was further undermined by unexpected measures regarding Cyprus bailout taken during the last weekend and the price of the front-month futures contract on Brent hit a new three-month low in intraday trading. Later in the session, the oil price found some ground and settled at 200 days moving average at 109.51 USD per barrel (USD/bbl).
Today, Brent edges towards 109 USD/bbl on an uncertainty related to vote on the bailout measures in Cyprian parliament.
In an interesting piece released yesterday, Reuters quoted industry sources who said Saudi officials held meeting in London to discuss rising Iraqi share in the world oil market, more specifically, in Asian markets. Recently, Iraq become the third largest supplier of oil in China, India and South Korea as its official selling price is set below the comparable Saudi Arabia crude (although Iraqi crude contains slightly more sulfur). Let us recall that disagreement over which OPEC members should cut oil production if needed dates back at least to December’s OPEC meeting. The disagreement stems mainly from the fact that Iraqi oil production has been soaring and, according to EIA data, increased by about 500 thousand barrels per day in February. Currently, Saudi Arabia maintains virtually all OPEC spare capacity. In our view, rising Iraqi oil production is one of the factors which could help to bring the oil price lower in following months.
Base Metals
Yesterday’s sale of risky assets had the most pronounced impact on base metals prices; the aluminium price fell by 1.5 percent while the price of the three-month contract on copper even shrunk by 2.3 percent. Moreover, fears of Cypriot vote on bailout measures continues to weigh on the price of the red metal today in early trading and the copper price is currently hovering at 7550 USD per ton level.
Precious Metals
Gold price benefited from a new wave of uncertainty related to Cyprus bailout and despite strengthening US dollar (on a backdrop of falling US treasury yields) posted the largest gains in three weeks and settled above 1600 USD per troy ounce.