EUROPEAN COMMODITIES UPDATE: Choppy trade in crude while base metals are underpinned by China's dam construction

Crude Oil: WTI Sep -0.5%, Brent Sep -0.6%

• Choppy trade with prices now ultimately softer following last week's volatility, which saw WTI find support at its 50 DMA (at USD 64.94/bbl today), with the EU at the end of last week announcing the 18th sanctions package on Russia.


• To recap, the latest EU sanctions package on Russia includes a lower oil price cap on Russian crude (from USD 60/bbl to USD 47.60/bbl, effective 3rd September) and a dynamic pricing mechanism. The G-7 cap remains unchanged, highlighting limited coordination and the ineffectiveness of the current cap, as Russia’s shadow fleet (444 vessels) continues to bypass restrictions. A proposed ban on imports of refined products made from Russian oil in third countries (e.g. India and Turkey, which account for ~15% of EU diesel imports) could tighten the European middle distillates market, though enforcement remains challenging. Additionally, a transaction ban on Nord Stream 1 & 2 effectively blocks any future gas flows through the pipelines.


• Sticking with geopolitics, Iran also confirmed that nuclear talks with France, Germany and the UK will be held in Istanbul on Friday. "A senior Iranian lawmaker warned on Monday that Tehran could halt its regional maritime security cooperation, including in the Strait of Hormuz, if European powers move to reimpose UN sanctions through the so-called snapback mechanism", via Iran International. Iranian Foreign Ministry spokesperson said a trilateral meeting with China and Russia is to be held on Tuesday regarding the nuclear file and UN snapback mechanism. Iran added that there are no current plans to talk with the US.


• Furthermore, there were also reports that the Israeli army conducted raids on Houthi positions in Yemen's Hodeidah and western coast.


• On trade, US Commerce Secretary Lutnick said he is confident they will get a deal done with the EU, while Lutnick said that President Trump is ‘absolutely’ going to renegotiate the USMCA. EU envoys are set to meet as early as this week to formalise a retaliation plan in the event of a possible no-deal scenario with US President Trump, according to Bloomberg.


• Traders will likely be eyeing further geopolitical and/or trade updates, but in the absence of those, the broader risk sentiment may take the helm.


• WTI resides in a USD 65.89-66.44/bbl range while its Brent counterpart trades in a USD 69.08-69.63/bbl range.

Precious Metals: Gold +0.5%, Silver +0.7%, Palladium +2.3%

• Firmer trade across precious metals, with the aid of a softer Dollar, but with macro newsflow in the European session somewhat light at the time of writing.


• Some desks have attributed the upside in gold to Fed Governor Waller, who reiterated his call for a 25bp rate cut in July, whilst tariff woes remain in focus heading into the August 1st deadline.


• Spot gold trades in a USD 3,344.90-3,370.82/oz range at the time of writing, and within last week's USD 3,309.79-3,377.66/oz parameter, awaiting the next macro catalyst.

Base Metals: 3M LME Copper -0.4%

• Mostly firmer, but to a lesser extent vs APAC trade, with base metals prices supported by China announcing that construction had begun on the world's largest hydropower dam, with an estimated cost of some USD 170bln. Prices may also be underpinned by the softer Dollar.


• The project will be located in Tibet and is set to "dwarf" the Three Gorges Dam.


• The behemoth project has no doubt provided a rosier outlook for base metals, with Dalian iron ore setting a multi-month high, closing higher by 2.1% and SGX iron ore +2.8%.


• Meanwhile, 3M LME copper trades +1% at the time of writing, in a USD 9,766.30-9,891.00/t range.

21 Jul 2025 - 10:00- ForexGeopolitical- Source: Newsquawk