EUROPEAN COMMODITIES UPDATE: Commodities hit by China’s COVID but a slide in the USD offers some reprieve

Analysis details (10:35)

WTI and Brent Jan futures have been under pressure since the reopening of futures trading, with Brent beneath USD 82/bbl for the first time since January (80.61-83.93/bbl daily range) and WTI printing a YTD low (73.60-76.49/bbl range) after Chinese daily COVID infections rose by a fresh record – with social unrest reported across the country, while prices were also subdued amid the negative mood and following reports that the US will grant Chevron a licence to import Venezuelan crude oil to the US. This comes ahead of the OPEC+ confab on Sunday whereby there is increased speculation that the group may opt to further cut production targets amid the continued downside in prices alongside the continuing demand-destructive zero-COVID policy from China. Ahead of the OPEC+ meeting, UAE's ADNOC is reportedly to cut 5% of December's crude oil supply to some term-lifters in Asia, citing the operational tolerance clause, via Reuters citing sources; but, will provide full contractual volumes for January. In terms of forecasts, JP Morgan cut its 2023 Brent crude oil forecast by USD 8 to USD 90/bbl, and sees Russian oil output returning to pre-war levels by mid-2023, adding that OPEC+ will need to cut by 400K BPD next year to balance the market. Elsewhere, EU talks on the Russian oil cap are set to formally resume today, although the bloc is split on the price level for the cap. European Commission proposed a cap of USD 65-70/bbl to EU ambassadors meeting last week but Poland and the Baltic states believe the price is too high. Ukrainian President Zelensky over the weekend called for the price cap to be set at USD 30-40/bbl. Over to metals, spot gold has been gaining in tandem with the losses in the US Dollar with the yellow metal gaining above USD 1,750/oz but still under November highs of around USD 1,786/oz. Base metals are mixed with the initial China-induced downside overnight somewhat trimmed/cancelled out by a slide in the USD, with 3M LME copper trading on either side of USD 8,000/t. 

28 Nov 2022 - 10:35- EnergyResearch Sheet- Source: Newsquawk