Friday April 12, 2019
1. Oil prices moving higher, but volatility lower
- Oil prices hit fresh highs for 2019 this week, pushed up by a tightening market and concerns over Libya.
- However, price volatility has been declining, “a pattern consistent with a tightening in physical markets following the OPEC+ output cuts, rather than (as in H2-2018) an expected, but unrealized, future tightening,” Standard Chartered wrote in a note.
- “Front-month Brent volatility began the year above 50%, but now stands at just 13%. The volatility curve is lower than in previous years, with the back below 8%,” the bank said.
- History suggests that when OPEC abandons market management, prices are more volatile. The market was highly volatile following the 2014 OPEC decision to produce at a maximum levels and not intervene, while volatility dropped significantly when the OPEC+ group initiated the first round of cuts in 2017.
- Once again, volatility has fallen this year as the cuts were phased in, even though prices are rising.
2. Copper up, but investment lacking
- Copper prices have rebounded from last year’s lows on supply concerns, but new investment is lacking.
- “[B]ecause prices have been relatively low since mid-last year and the trade tensions initiated by the US are generating uncertainty, virtually no investment is being made at present in major new copper projects,”…