EUROPEAN COMMODITIES UPDATE: Commodities curtailed by the risk tone with no respite derived from the USD

Analysis details (10:45)

• Oil under pressure amid the broader tone in APAC hours and as Israel seemingly agrees to delay its ground invasion to allow for hostage negotiations. Since, benchmarks derived a bid alongside a deterioration in broader sentiment amid Bloomberg reporting that the US and its allies are speaking about their concerns that the Israel-Hamas war will spread. More broadly, geopolitical developments have been somewhat limited in nature this morning but updates thus far include further reporting of aid convoys making their way into the Gaza Strip. Developments which come alongside continued coverage of Israel craft striking targets within the Strip. From the Israel side, officials say there will be no ceasefire within Gaza while Iraq’s PM has called for security forces to target those which are attacking military bases.


• Geopolitics aside, the day’s session has been characterised by continued upside for the yield space with the US 10yr yield above the 5.0% mark though the USD has thus far found itself unable to benefit with the DXY languishing in close proximity to the 106.00 mark.


• In terms of where we currently stand, crude benchmarks are towards the top-end of circa. USD 1.50/bbl parameters, in proximity to their Friday troughs but by extension well within last week's boundaries. On the complex, Citi writes that their short-term momentum model forecasts higher oil prices going into the end of October, alongside a neutral-bullish signal for ICE Brent over the next 4-10 days. Currently, WTI & Brent Dec’23 are holding near the USD 88.00/bbl and USD 92.00/bbl marks respectively, within USD 86.83-88.29/bbl and USD 91.08-92.45/bbl bounds.


• Spot gold is not really benefiting from the risk tone or USD weakness, with the yellow metal in a narrow range and yet to reapproach last week's USD 1997/oz peak, with little of note from a technical perspective in proximity given the magnitude of last two week’s price action. Back to Citi, on gold the desk remarks that their base case has record gold prices in play for 2024; a record that was set on May 4th at USD 2072/oz. Base metals pressured by the risk tone and also unable to benefit from the softer USD, LME Copper pressured and down to the USD 7.9k/T mark and circa. USD 50/T down from Friday’s close.


• Elsewhere, much attention has been on China’s decision to curb the export of graphite which serves as a crucial material for EV batteries, particularly as China is responsible for refining over 90% of global graphite into the required product for batteries. Following the announcement, numerous corporate officials in the space have stated that the move will serve to increase the pace of development in alternate supplies with particular reference to the US.

23 Oct 2023 - 10:39- Research Sheet- Source: Newsquawk