The price of Brent crude oil has risen above the $40 a barrel mark as the global market witnesses a recovery in commodity prices.
Brent Crude Surges to $40 as Iron Ore Prices Rise By 19%
In the last month, commodity prices have jumped on the anticipation that China will work toward boosting growth following two years of slow economic progress.
Oil, food, and base metal prices have recovered significantly since the start of the New Year. On Monday, crude oil rose above $40 a barrel after dropping to lower than $28a barrel at the start of the year.
Following China’s announcement of its plans to boost growth, iron ore prices have seen a significant rise of as much as 20%.
China’s finance minister, Lou Jiwei, assured the world that the government could handle the mounting debt as it increased its deficit spending to prevent a massive decline in growth.
Lou said, “We are expanding the ratio between debt and GDP in order to achieve a medium to high-speed economic growth rate.”
He added, “We are doing this because we do not want to see economic growth decline and because we want to strongly support structural reform.”
While China is the largest consumer of iron ore in the world, the US, Australia, Brazil and Canada are the largest producers.
Reports indicate ore with 62% iron shipped to Qingdao increased in price by 19% to sell at $63.74 per dry metric ton, driving prices back to their highest since June last year.
Goldman Sachs however cautioned that the rise in iron ore prices would not stay that way unless China significantly increased its demand for steel. The investment bank gave a bearish outlook for commodity prices and indicated that the market had not changed much following the collapse in iron ore prices.
In a report, Goldman said, “We expect the current rise to be short-lived give there is no substantial increase in demand for steel in China. Steel raw materials will affect steel prices and not the other way around.”