PERTH: Rio Tinto’s largest product iron ore rose 6.6 per cent to $US71.26 per tonne in the past five days, according to The Metal Bulletin’s index of spot prices sold to the Chinese port of Qingdao.
The strongest five day bounce in iron ore in the past 16 months came after its four year slide from a record high of $US191.70 per tonne. Iron ore struck a 5½ year low of $US66.84 last week.
After betting on a strong recovery in crude oil after the OPEC meeting, speculators last week reduced their net long positions for the first time in four weeks.
Crude oil is a key part of BHP’s four pillars strategy, fell 7.1 per cent to $US58.07 per barrel in the past five days and struck a fresh 5½ year low of $US55.81. Natural gas, also a major commodity for BHP, fell about 10 per cent in the same period.
While expectations of further monetary stimulus in China, the world’s biggest buyer of iron ore are fanning recovery in the commodity, energy prices continue to suffer after OPEC’s decision to maintain production in the face of increasing oversupply due to the US shale oil revolution.
Analysts will also be under pressure to reduce their oil price forecasts and that could flow through to their earnings expectations and price targets for oil and gas producers such as BHP.
The consensus of 12 months target price for BHP is $36.11 a share, 22 per cent above yesterday’s closing price of $29.54. The consensus target for Rio is $68.96, or 18 per cent above yesterday’s close at $58.33.
