Oil prices have reached a new high of over $40 per barrel, a first for the whole year amid improvements in the value of commodities. Brent Crude has risen by around 5 per cent and is now trading at $40.83 per barrel. In January oil prices dipped below $28.
The increase has followed a wide resurgence in the prices of energy and metal such as, iron, copper and aluminium.
In particular the price of iron spiked by 20 per cent, its highest point in the last eight months, due to newly found confidence in the Chinese economy as a whole, their decline in demand for iron for their refineries and a possible cut to production of the metal to ease the glut.
Iron ore reached its highest price since June last year trading at $63.74, copper is up by 6.9 per cent overall this year and also aluminium is up by 5.3 per cent.
Another factor affecting the oil prices small comeback is the possible deal being put in place between oil-producing countries who are actively seeking to improve the current glut issue which is consuming the industry. No firm agreement has been made between the countries involved however there is to be a meeting in Moscow this month.
Although the increase is welcomed Brent crude still remains 70 per cent below its highest point in 2014. However Fitch, the ratings agency has estimated that the price will float around the $35 point for the rest of this year.
One economist, Simon French of Panmure Gordon commented on the increase stating that it may just be a passing phase:
“A large part of the oil price movement in recent days has been short covering, where investors having taken a bet on low prices are insuring themselves against the risk of higher prices. Very little has changed in the oil market to correct the supply glut.”
Another economist was also weary of the positive outlook, Adam Laird of Hargreaves Lansdown stated:
“Today’s trading was extraordinary. Metal prices can be volatile, but it is rare to see price rises of this magnitude in any asset. It is a signal of markets’ desperation. China is a major consumer of steel and prices are reacting to any hint of an uptick in demand. But in the context of the falls of the last few years, today’s price is still low. ”
He also added that it was, “too early to say if this is a true bounce”.