EUROPEAN COMMODITIES UPDATE: Commodities decline as a firmer Dollar and softer sentiment weigh on the complex

Analysis details (10:49)

WTI and Brent September contracts have been slipping since around the European cash equities open with little in terms of fundamental headlines at the time to trigger a selloff. Crude markets could be working off the back of several factors: a) downbeat sentiment arising from Italy’s political situation, b) German Energy Regulator suggesting the Nord Stream 1 pre-maintenance level of 40% capacity could be surpassed today, c) Chinese Disease Control placing close attention to transmission capability and pathogenicity of COVID variants in the “long term”, d) technical factors as WTI and Brent Sep’22 lost USD 99/bbl and USD 106/bbl respectively at around the same time, e) Libya's oil output recovering to above 700k BPD; with 1.2mln BPD expected in 7-10 days. Delving deeper into Nord Stream, Dutch TTF futures have been under pressure as fears subsided with regards to whether Russia will turn the taps back on after the 10-day maintenance period. The pipeline resumed operations on Thursday, in fitting with the schedule, but with only 40% of its capacity (in-line with guidance) - the same level it was operating at in mid-June, when Gazprom trimmed gas flows on the back of a delay in the return of equipment amid sanctions. Desks however suggest that the continued reduced supply is likely to make it more difficult for countries to replenish their storage for the winter, i.e. when gas usage is much higher - Germany’s regulator suggested the 40% capacity could be surpassed today, with flows likely to be monitored throughout the session. Over to metals, spot gold continues trundling lower after surrendering the USD 1,700/oz handle as the DXY is propped up by a decline in the Euro, whilst base metals are mostly lower amid a firmer Dollar and a sullied risk tone.

21 Jul 2022 - 10:49- EnergyResearch Sheet- Source: Newsquawk