On Monday, Brent crude posted small gains as an initial positive response to a fresh Cyprus bailout deal was later in the afternoon nearly offset by comments of Eurogroup chairman Dijsselbloem suggesting that the Cyprus deal was a template for further rescues. Still, the front-month contract on Brent (ICE) managed to settle above 108 USD per barrel (USD/bbl) level. Words of Saudi Oil Minister Naimi who reiterated the reasonable oil price for both producers and consumers is 100 USD/bbl had no significant impact on prices.
Regarding the North Sea physical market, the oil price remained under pressure yesterday and Forties differential against Dated Brent fell, according to Reuters data, to the lowest level since May 2010. Let us recall that the price of North Sea oil - and consequently Brent ICE timespreads - have been lately under pressure due to the several reasons (lower demand stemming from refinery maintenance, uncertainty around South Korea oil imports among others). Those factors may, however, gradually fade away in weeks ahead (moreover, recent fall in Forties price has made the grade more competitive to other grades such as Urals; the spread between the two fell to a four month low) and we thus continue to expect the average price of oil in the second quarter to reach 111 USD/bbl.
Gold price fails to hold above resistance at 1605 USD per troy ounce (USD/toz) and today in early trading is hovering at 1600 USD/toz level. Recent increase in the price of gold (partially stemming from the uncertainty around Cyprus bailout) has deterred Asian consumers from buying more metal in the physical market.
Today, markets will focus on US durables and new home sales for February. We believe the risks are on the downside which might cap the room for gold losses.