EUROPEAN COMMODITIES UPDATE: BoJ dictates the overall tone while gas markets cool & await an ICE update

Analysis details (10:45)

• In-fitting with other asset classes, the initial macro tone was dictated by the BoJ’s surprise YCC adjustment. With the crude benchmarks slipping in tandem with broader sentiment initially and in the hours since have pared this pressure and are now posting upside just shy of USD 1.0/bbl. BoJ aside, newsflow has been fairly limited. In terms of complex specific developments, the main updates have been in reference to various OSPs being announced for the first months of 2023 and commentary from Barclays who reiterates the view that demand 1-2mln BPD below forecast would imply USD 15-25/bbl downside to USD 98/bbl Brent price forecast in 2023.


• For the session ahead, given the light schedule, any remarks relating to the gas price cap will draw heightened scrutiny after yesterday’s decision to impose a EUR 180/MWh cap; particularly, any further clarity from ICE following it confirming it will be reviewing the feasibility of the cap. Reminder, the exchange has previously warned that the cap could see the TTF market removed from the EU/Netherlands. On this point, the German BDEW Energy Association has expressed concern over the cap remarking that it needs adjusting and monitoring if it hampers supply to Europe. Currently, Dutch TTF Jan’23 remains under modest pressure, but is yet to slip below the EUR 100/MWh mark.


• Moving to metals, spot gold and silver are bid given the BoJ-inspired tone with further upside occurring in the early European morning as the USD slumped to a fresh incremental low, action which lifted the yellow metal a handful of ounces above the USD 1800/oz handle. Elsewhere, base metals are firmer on the session in action that is for the most part in-fitting with the above risk tone/dynamics.

20 Dec 2022 - 10:40- Research Sheet- Source: Newsquawk