EUROPEAN COMMODITIES UPDATE: Commodities consolidate following Tuesday’s Fed-induced declines

Analysis details (10:33)

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  WTI and Brent front-month futures remain subdued around yesterday’s worst levels after both contracts settled lower by almost USD 3.00/bbl following the Powell-induced selloff after the Fed Chair signalled tighter monetary policy for longer – Brent settled under its 50 DMA (USD 83.71/bbl) at USD 83.29/bbl. In demand of demand, the EIA STEO yesterday raised its 2023 world oil demand growth forecast by 370k BPD to a 1.48mln BPD Y/Y increase and the 2024 forecast was left unchanged at a 1.79mln BPD increase, while it expects 2023 world oil production to average 101.5mln BPD in 2023 which is up 1.6mln BPD from 2022. Elsewhere, prices were little swayed by the large surprise draw in the private inventories (Crude -3.8mln exp. +0.4mln), although the internals were bearish. In terms of OPEC-related commentary, OPEC Secretary General said the group is focusing on stability and less volatility, while he added that China is to account for 500k-600k BPD of oil demand in 2023. Furthermore, the Saudi Foreign Minister said they are committed to a stable oil market and his view is that they do not need production changes this year, while he added that every statement he’s seen made on the record is from all of the partners in OPEC+ reflecting a consensus approach and said that reports of divergence in UAE/Saudi relations are often overdramatised. Analysts at Barclays hit the wires with crude forecasts – Barclays cuts crude price forecasts and sees WTI averaging USD 97/bbl this year, and USD 92/bbl in 2024. The bank forecasts a Q4-Q4 decline of 500BPD (prev. 700k) in Russian output this year and estimates the market is running a supply surplus of circa. 0.8mln BPD, could flip into a deficit of circa. 0.5mln BPD in H2 as a reopening-led recovery in China matures, and non-OPEC+ supply growth slows.


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  Gas markets are mixed with Dutch TTF futures modestly firmer just above EUR 43/MWh and US Henry Hub futures softer but still above USD 2.50/MMBtu after testing levels near the psychological mark earlier this week. Meanwhile, the EIA lowered its forecast for nat gas and now sees prices averaging USD 3.02/MMBtu this year, down 11.2% from its previous forecast of USD 3.40/MMBtu.


• Spot gold trades horizontally after yesterday’s near-USD 40/oz decline in wake of a hawkish Fed Chair, whereby he put a 50bps hike for March in play and flagged higher terminal rate projections. From a technical perspective, the yellow metal resides above the lows seen at the end of February and remains north of the 100 DMA (USD 1,806.17/oz) after declining below its 21 DMA (USD 1,838.33/oz) yesterday. Base metals are mixed amid the tentative mood after Tuesday's decline, whilst China’s auto body PCA said Retail Passenger Vehicle Sales in February rose 10.4% Y/Y (vs prelim 9.0% Y/Y; vs -37.9% Y/Y in January), with the recovery reportedly lead by NEVs.

08 Mar 2023 - 10:33- Fixed IncomeEU Research- Source: Newsquawk