The front-month contract on Brent (ICE) gained about 0.5 percent and settled at 103.61 USD per barrel (USD/bbl) yesterday. Oil draw support mainly from the weaker US dollar and yet another production outage at Buzzard oil field (second this week) might have also played a minor role. According to Nexen (Buzzard operator), the field’s production is expected to resume over the weekend.
In spite of recent production issues at Buzzard and although refining margins have slightly picked up over the past few weeks, the situation in the North Sea oil market remains calm. As far as the fresh BFOE loading program is concerned, it showed an increase to 813 thousand barrels per day in July from 740 thousand in June. This indicates that there may be no strong pressure on the price of physical North Sea oil in July.
Base Metals
Copper may have seen some profit taking on Thursday as the three-month contract (LME) saw the largest daily drop in last nine sessions. The factors that have supported the red metal over the past days have remained in place; namely, copper fared well after the Indonesian Government stated that the production of the metal in the Grasberg mine could be halted for up to three months due to the investigation of May’s two accidents, in which a total of 39 miners died. Keep in mind that Grasberg is the world’s second largest mine, with approximately a 4% share in global production, and this is a significant volume in the overall market balance. Moreover, landslides have made another major mine in the United States (Bingham Canyon, with 1.5% of global production) cut its production. Moreover, there appears to be a pressure in China’s physical market as Shanghai’s physical premiums are the highest since November 2011. We therefore maintain our view that the average copper price in the third quarter may rise to 7600 USD/t.