The front-month contract on Brent gained more than one percent and settled at the highest level in last five days yesterday. Yet another set of dovish comments of Fed officials (Dudley) might have playeda role and the oil price even temporarily breached resistance at 103.2 USD per barrel (USD/bbl) in intraday trading.
Despite yesterday’s gains, the oil price is set to post loss in a third consecutive quarter, this time the largest since the same period of the previous year, as rising oil production overtakes oil demand growth in absence of any major production disruptions.
Prices of base metals also dropped significantly in the last two weeks. Although the prices of both metals fell continuously throughout the commented period, much of the decline occurred after the Fed meeting last Wednesday. For aluminium, this was accompanied by the technical factors of breaking through the barriers at around US$1,825/t, followed by a drop to nearly four-year lows, well below another support level of US$1,800/t. Moreover, not even May’s data suggests any change in the fundamental picture of the aluminium market, which has been affected by overproduction for a long time.
Meanwhile, the price of copper fell to almost three-year lows and even temporarily hit below the support level of US$6,635/t (the 2011 lows); breaking through that level would open the door to a fall to as low as US$6,000/t. In addition, neither the problems in the Chinese financial sector nor the news on the partial resumption of production in the Indonesian Grasberg mine, which should have been closed until August according to initial forecasts, encouraged the price of copper.
The rising physical premiums and the good conditions for an arbitrage to China may help prevent breaking through the above-mentioned support level; nevertheless, further sales of risky assets, triggered by another possible rise in market interest rates in the United States, continue to pose a risk to the price of copper.