Mining stocks rally as demand for oil is expected to rise and UK economy strengthens

KOLWEZI, DRC – JULY 7: The sun sets over one of Mutanda Mining Sarl’s surface copper mines on July 6, 2016 in Kolwezi, DRC. The mine is owned (69%) by Glencore, an Anglo-Swiss multinational commodity trading and mining company. The mine mainly produces copper but also cobalt. The mine employs around 3,500 people and is located in Luabala province in southern DRC. A truck transports a load of ore to the processing plant. (Photo by Per-Anders Pettersson / Getty Images)

Mining stocks rose on Friday, helping the FTSE 100 (^ FTSE) to reach its highest level in a month.

Glencore (GLEN.L) increased by more than 3%, Antofagasta (ANTO.L) climbed 2.5% and Evraz (EVR.L) rose 2.7% in midday trading, taking the London benchmark to its highest level since May 10, when it hit a new all-time high since the start of the pandemic.

Newly listed Thungela resources (TGA.L), an Anglo American spin-off (AAL.L) also rose 2.4% on the day, while healthcare stocks also joined precious metal and base metal miners in the reprise.

Glencore was among the biggest gains in the FTSE 100 on Friday.  Chart: Yahoo Finance

Glencore was among the biggest gains in the FTSE 100 on Friday. Chart: Yahoo Finance

It happened as metal prices and oil prices rose on Friday as the International Energy Agency (IEA) said on Friday that demand for oil is expected to exceed pre-COVID levels by the end of 2022, but oil producers will need to increase production.

The Paris-based body expects consumption to rebound by 5.4 million barrels per day (bd) this year as vaccines are rolled out and economies reopen. Consumption fell from a record 8.6 million bj in 2020 as the coronavirus pandemic took hold.

He expects a further increase of 3.1 million bj in 2022, to reach an average of 99.5 million bj with an increase at the end of the year that will exceed the level of demand before the pandemic of COVID.

Countries outside of the Organization of the Petroleum Exporting Countries and Its Allies (OPEC +) are expected to increase production by 1.6 million barrels per day next year, to exceed 2019 levels.

While the OPEC + countries will have 6.9 million bpd of unused capacity even after increasing production by 2 million bj over the period May-July.

Read more: Oil demand to exceed pre-COVID levels by end of 2022

London miners were also boosted by reports that the UK economy grew 2.3% in April, the fastest rise since July 2020.

The figure, which follows strong growth of 2.1% in March, was slightly above the Reuters poll consensus for an increase of 2.2% as non-essential stores and outdoor hotels reopened in the public after months of foreclosure.

The services sector provided the biggest boost to the UK economy, with output growing 3.4% in the month.

However, overall production remains 3.7% below pre-pandemic levels seen in February of last year. Production in the manufacturing sector fell 1.3% in April 2021, the first drop since January 2021, as three of the four sectors contracted.

Watch: Could mining be making a comeback in Cornwall?

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Felix J. Dixon