Oil performed relatively well in comparison with the rest of commodities and settled barely changed at 108.5 USD per barrel on Monday. Unlike the rest of commodities, Brent has drawn support from recurrent supply-side issues stemming from the situation in Libya. Meanwhile, rising backwardation in the short-end of the CFD curve suggest that trading activity and demand for physical North Sea oil has picked-up lately. Nevertheless, significant strengthening of demand is not likely as refinery margins in Northwest Europe remain poor.
Base Metals
On Monday, aluminium extended sharp losses recorded in previous three weeks and the price of the three-month contract fell even deeper below 1800 USD per ton (USD/t). After rising prices in previous four months, aluminium is set to post the largest monthly loss since June this year. At the time of writing of this note, aluminium is trading in the vicinity of a support at 1775 USD/t. If the support is breached, aluminium will open the room for further losses – the next target is seen at 1758 USD/t.
Precious Metals
Precious metals underperformed the most of commodities on Monday as two Fed officials pointed to improvement in the US economy. William Dudley, an influential central banker and supporter of the easy monetary policy, said yesterday he was getting more hopeful on the prospects of the US economic recovery and added that he expects a more substantial improvement in labor market conditions and an up-drift in inflation as growth picks up. Even though yields of 10-year US note barely changed, the price of gold fell by more than 1 percent and is therefore still set to post loss in a third consecutive month.