On Thursday, Brent extended previous gains and the front-month futures contract (ICE) settled at 103.41 USD per barrel (USD/bbl). Later in the afternoon, the oil price was supported by better than expected US initial claims data; reaching 339 thousand, these were a lot stronger than expected.
Although we are inclined to anticipate a gradual fall in oil prices in a longer term, we view last week’s dramatic drop as premature and excessive, and expect pressure on North Sea oil prices to increase in the weeks to come. This should be primarily fostered by higher demand from refineries. Bear in mind that an unusually large portion of European and other refining facilities are still out of commission at the moment, and this is likely to change with the advent of the traditionally higher demand for light products in the summer season. As a matter of fact, recent surge in ultra low sulphur diesel
premiums and decline in gasoil stocks (ARA) play in favour of the above mentioned scenario.
Base metal complex posted yet another strong gain on Thursday; as a result, three month copper (LME) settled at 7180 USD per ton (USD/t) while aluminium at 1941 USD/t. Although copper price slides from weekly high, the metal is set to post the largest weekly gains since early February. For copper, just like for oil, we believe that last week’s fall in prices was too aggressive and anticipate a price recovery during the summer, which should tend to be temporary, however; over the longer term, we expect copper price to remain under pressure mainly on improved supply of the metal.