Commodities Update 36

Commodities Update 36

06 April 2016

Important legal information

Oil price retreated somewhat lately, declining below $40 again. However, Brent Oil price is still up 4% for the 1st quarter – WTI price on the other hand, has declined by 1,3%.

Oil price hit a low point earlier in January this year. A recovery period started shortly thereafter as oil producers announced production cuts and US fracking industry was set for production decreases. However, global oil reserves remain at historically high levels. For instance, in US, the oil reserves are at a level not seen since the aftermath of the “great depression”. The oversupply of oil may represents a major challenge for potential oil price appreciation in the near term.

Commodity analyst Ole Hansen of Saxo Bank believes that oil price will recover, however, the path and timeline is very unclear. Furthermore, Ole Hansen is of the view that oil price could potentially stabalise in 2Q , but a recovery could be delayed. The stock markets were affected by the decrease in oil prices in first quarter 2016, but have recovered since, also supported by expectations of slower paced interest rate hike scenario from FED.

With a price increase of 15% year to date, Gold has seen its best performance since 30 years. However, as a result of unexpectedly good economic data from US, Gold price retreated recently to $1,210, representing a 7-week-low. Commerzbank analysts expect the low interest rate environment to persist for some time given the high borrowing levels of many countries. Recent introduction of negative interest rates support this view.

The receding oil prices also had spill-over effect on metal prices such as copper. The copper price fell occasionally by 5%, Nickel about the same, while Zinc decreased only by 0.3 percent. Aluminum price developed against the trend, up 3%.



04/10/2022 06:36:06