EUROPEAN COMMODITIES UPDATE: Commodities are under further pressure as risk remains on the backfoot

Analysis details (09:58)

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  WTI and Brent futures are once again softer after both April contracts settled with losses yesterday. WTI now hovers at the lower end of a USD 74.96-76.55/bbl range while its Brent counterpart trades near the trough of its USD 81.70-83.25/bbl intraday parameter.


• News flow for the crude complex has been light this morning, with price action largely dictated by the risk sentiment in the run-up to FOMC minutes later today. “Markets continue to come to terms with expectations of a more hawkish Fed, following a raft of economic data suggesting the Fed still has quite a bit of work to do. These headwinds, combined with a fairly comfortable oil balance, mean that the oil market will likely remain rangebound”, analysts at ING posit, whilst forecasting the crude market breaking out of its recent range to the upside later this year as the oil market significantly tightens. Elsewhere, the Caspian Pipeline Consortium (CPC) said oil flows to the Black Sea terminal (capacity of 1.6mln BPD) have been halted, with prior reports suggesting this is weather-related. Desks suggested that the longer the terminal is offline, the greater the chance that storage in the area will be filled up, with Kazakh flows likely to be impacted - the CPC terminal handles roughly 80% of Kazakh crude and condensate loadings.


• Mixed trade is seen across the major natural gas futures, with US Henry Hub briefly dipping under USD 2/MMBtu for the first time since 2020, whilst Dutch TTF trades modestly firmer but still under EUR 50/MWh. Desks are citing the continuation of milder-than-expected weather as a reason for softness in the market.


• Spot gold has given up its modest initial gains as the DXY strengthened on the back of deteriorating risk sentiment, with participants on standby for the FOMC minutes released later today. From a technical standpoint, the yellow metal remains within yesterday’s USD 1,829-1,841.34/oz range, with the 10 DMA seen at 1,845/oz ahead of the psychological USD 1,850/oz mark. Base metals are mostly lower amid the broader market risk aversion with 3M LME copper falling from a USD 9,120/t intraday peak to a session low just above USD 9,050/t. Meanwhile, mining giant Rio Tinto, in their earnings, suggested the Iron ore market is tighter than perceived in 2022, whilst “iron ore supply trended below its 2021 and 5-year average levels during most of 2022”. On aluminium, the Co. suggested “Aluminium demand growth slowed in H222, first in Europe and Asia, then North America later in the year… Aluminium production increased by 2% in 2022, driven by 4% growth in China… The market tightness is very clear in the US, where the Midwest premium has now rallied by over 50% from the Q4 low”. On copper, Rio Tinto said “Visible stocks fell to historically low levels and will require rebuilding in coming years after market deficits… Investors increased their copper position through H2.”

22 Feb 2023 - 09:58- Research Sheet- Source: Newsquawk