The oil price fell from a three-month high on Monday and the price of the front-month contract on Brent settled at 107.43 USD per barrel (USD/bbl). Despite further escalation of riots in Egypt, the oil market seems to reflect that one of the key oil trade routes – Suez Canal & SUMED pipeline – continue to operate smoothly. Moreover, restart of production at Libya’s Sharara oilfield (about 350 thousand barrels per day) may help to ease conditions in the physical market in weeks to come (let us recall that the spread between the front-month and the six-month contract on Brent has widened significantly over the past two weeks and indicates tightening conditions).
Base metals prices grew across the board yesterday after they had fallen sharply on better than expected US payrolls figures for June (released last Friday). Regarding yesterday’s trading, copper lagged behind its peers and the three-month contract (LME) gained only 0.6 percent; news that copper concentrate shipments from Indonesia’s Grasberg mine were resumed (after a month) might have weighed on the price.
Although we think that market fundamentals play in favour lower copper prices over the medium term, we do not exclude an increase over the summer, mainly on higher Chinese demand (either physical or financial). At the same time, however, we think that any significant upside move of copper price (above 7200 USD per ton) could hardly be sustainable and could mean an interesting hedging opportunity for the fourth quarter.