EUROPEAN COMMODITIES UPDATE: Chinese stimulus underpins industrials, but eyes US inflation

Analysis details (09:47)

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  WTI and Brent front-month futures are modestly firmer intraday, but in the bigger picture, prices are consolidating after the most liquid contracts settled lower by some USD 3/bbl apiece yesterday. The losses yesterday were partially attributed to Goldman Sachs slashing its price forecasts. Goldman's Jeff Currie, who has been driving a "commodity Supercycle" narrative for years, said, "Oil prices are down USD 10/bbl over the past two months despite last week’s announcement that Saudi Arabia will deliver an extra extendable production cut... we are lowering our December 2023 Brent forecast to USD 86/bbl from 95/bbl previously”. WTI settled just above USD 67/bbl yesterday after Friday’s USD 70.17/bbl settlement. Back to today’s trade, the complex saw some upticks overnight following the short-term interbank funding rate cut overnight by the PBoC, whilst further source reports via Bloomberg signalling even more stimulus kept the benchmarks underpinned ahead of the European open. Overall, markets are awaiting the release of the US CPI which is the last piece of the puzzle ahead of tomorrow’s FOMC announcement, whereby a June “skip” is seemingly analyst consensus. Aside from the US CPI data, participants will also be eyeing the weekly Private Inventory data after the Wall Street close. Sticking with energy, European gas prices are once again on the back foot following recent volatility. “Prices have zigzagged in the past week amid an array of competing factors,”, according to Bloomberg, citing factors such as plant outages, and the onset of hot weather in Europe and Asia, “While fuller-than-average storage levels are still providing a sense of security as Europe prepares for the upcoming heating season, traders appear to be bracing for the possibility of a tighter market, with prices nearly 25% higher than they were at the start of this month.”


• Over to metals, spot gold marginally benefits from the softer Dollar but price action is contained ahead of the US CPI metrics, with the yellow metal oscillating near its 21 DMA (1,961.64/oz) and its 10 DMA 1,959.97/oz). Elsewhere, industrial metals are broadly benefitting from the Bloomberg source reports which suggested China is said to be weighing broad stimulus with property support and rate cuts. Plans reportedly include at least a dozen measures to support domestic demand and the property sector, with interest rate reductions also being mulled. The State Council may discuss policies as soon as Friday, although may not be announced or implemented. Furthermore, in copper-specific news, Boliden reported a fire at the Ronnskar copper smelter facility, with all production there stopped until further notice. Boliden said the initial assessment is that production can be resumed in a few weeks – the smelter can produce 250k tonnes of copper per annum and is one of the world’s largest smelters. LME copper continues to edge higher above USD 8,400/t from a USD 8,286.50/t intraday low.

13 Jun 2023 - 09:50- MetalsData- Source: Newsquawk