On Thursday, the price of the front-month futures contract on Brent (ICE) underperformed the most of commodities and hit a five-month low at 105.29 USD per barrel. Brent was particularly hit after the release of weekly US initial claims report which surprised on the upside of expectations. At the same time, however, demand for physical North Sea oil slightly picked up as the recent fall made the price of Brent & co. more favorable in comparison with other crudes (see the chart). Unlike the previous year when European crude arbitrage to South Korea was the main topic, it even is economical to export North Sea oil to the west (according to trading sources quoted by Reuters).
Earlier this week, Saudi Arabia confirmed it expects stronger Asian demand for its crude and raised its official selling price to Asia. At the same time, it slightly lowered the price of oil sold to US consumers and maintained prices for its exports to Europe.
Base metals prices took a breather yesterday and erased a part of previous losses – three month contracts on both aluminium and copper (LME) gained about 0.7 percent.
Regarding copper, after years of deficits, the refined copper market should return to visible surpluses this year. The increasing production of the metal was already evident in late 2012, and in December it exceeded 1,800,000t for the first time. While last year’s improving situation in the market was hidden behind the significant increase in the stocks at bonded warehouses in Shanghai, the improvement is already evident in the stocks at global exchanges this year – the stocks at the LME climbed to nearly 10-year highs. The curbed industrial demand also favours a further decline in the price of copper. A disconcerting factor for the future may be that more than two-thirds of the stocks of copper at the LME are accumulated in three warehouses (New Orleans, Antwerp, and Johor) while a large quantity of zinc is about to be taken out of two of those warehouses (New Orleans, Antwerp). Nevertheless, given the rising production and curbed demand, the physical premiums on the metal outside the LME remain at fairly low levels.