EUROPEAN COMMODITIES UPDATE: Choppy trade in crude, whilst gold holds onto recent gains and base metals remain mostly firm

Analysis details (10:23)

WTI and Brent front-month futures trade volatile with two-way action seen in the European morning. Upside in the complex is capped by COVID woes in China after Chengdu, a Chinese city of 21mln people, extended its COVID lockdown indefinitely, whilst China more recently said it encourages citizens to stay put during China National Day holidays (Oct 1st-7th) and to avoid travelling outside of their cities, with the Transport Ministry forecasts mid-Autumn travel to drop 32% Y/Y. “The broader strength seen in the USD has weighed heavily on the commodities complex, whilst Chinese demand concerns are certainly not helping. For oil, we will need to keep an eye on OPEC+ and how they might react to the more recent weakness in the market”, analysts at ING warn. Analysts at JPM believe OPEC+ will need to cut another 1mln BPD to stabilise the market. Elsewhere, the EIA STEO raised its 2022 world oil demand growth forecast by 20k BPD to +2.1mln BPD Y/Y and the 2023 world oil demand growth forecast was cut by 90k BPD to +1.97mln BPD. The IEA OMR and OPEC MOMR are due to be released next week. Over to gas, Dutch TTF contracts to Q1 2023 are trading close to the EUR 200/MWh mark that EU leaders are eyeing in their latest price caps, whilst Nord Stream 1 nominations remain at nill. In terms of metals, spot gold holds onto yesterday’s gains north of USD 1,700/oz, but under the USD 1,726.79/oz high set on Tuesday, whilst the Russian Finance Minister considers it reasonable to build reserves in gold and Yuan, according to Tass. Base metals are mostly firmer but the upside is capped by China’s COVID woes, nonetheless, 3M LME copper is supported by reports that Workers at Chile's Escondida copper mine voted to strike over safety concerns.     

08 Sep 2022 - 10:22- Research Sheet- Source: Newsquawk