May 2016 Market Commentary | IFA Colchester

The price of Brent Crude Oil rose by 6% during May (in Sterling terms), taking total cumulative gains to around 50% since oil prices reached multi-year lows during the first couple of months of 2016.

“Black Gold” has certainly made a strong recovery from the oversold levels seen this winter thus far; supply increases, market fears and other technical reasons drove prices to levels that were temporarily inconsistent with the general range of long-run production costs, which we broadly estimate to be between $30 and $50 per barrel.

Many other Commodity prices have also participated in the ‘oil recovery’ of the last four months, suggesting that wider financial market dynamics are in fact at work. The potential for global core inflation figures to pick up in coming months has heightened as a result of the base effect that goes into inflation rate calculations. Other positive macroeconomic factors also point to a potential increase in core inflation rates.

Gold, however, went in the opposite direc