EUROPEAN COMMODITIES UPDATE: Commodities pressured by broader Buck strength and risk aversion, but precious metals outperform base counterparts

Analysis details (08:55)

• WTI and Brent front-month futures are pressured by the overall market mood alongside the firmer Dollar, with the recent flurry of central bank hikes not helping the demand side of the equation. WTI November has dipped under USD 82.50/bbl from a USD 83.92/bbl high, whilst its Brent counterpart declined under USD 89.50/bbl from a USD 90.84/bbl overnight peak. Aside from that, complex-specific newsflow has been light, but traders may keep an eye on weekend developments as EU member states gear up to meet to discuss further Russian sanctions. “There are suggestions that the aim is to come to a preliminary agreement by early October, ahead of an EU leaders’ meeting. Getting all members to agree on a price cap could prove difficult, just like we saw with the EU ban on Russian oil, which was watered down to include only seaborne trade, given objections from Hungary. EU members will want to come to a final decision by 5 December, which is when the ban on Russian seaborne crude into the EU comes into force.”, says ING in a brief preview.


• Ahead of that, price action today will likely be dictated by the Dollar and overall sentiment, barring any major geopolitical developments. Meanwhile, in the run-up to the OPEC+ meeting in a couple of weeks, Russian President Putin spoke to Saudi Crown Prince MBS and discussed the question of coordination to ensure stability in the oil market, while they praised efforts within the OPEC+ framework and confirmed the intention to continue sticking to existing agreements, according to Reuters. Elsewhere, the Iranian nuclear deal seems at a dead-end - US Defense Department spokesman said they are not likely to get to a nuclear deal any time soon, whilst Iran continues to blame Washington for the impasse but suggests Tehran is still up for negotiations.


• In the power markets, the EU has cast doubt on the ability to intervene in energy derivatives markets and concluded that big swings in power prices are not due to "market malfunction", according to FT citing the Commission presentation to diplomats on Wednesday. Furthermore, officials expressed doubt on the degree to which collateral rules could be broadened as the ESMA recommended.


• Over to metals, the firmer dollar has weighed on broader metals markets, but precious metals are outperforming base metals – spot gold remains within yesterday’s range with losses of around a ¼ of a percent at the time of writing, whilst 3M LME copper falls over 1.5% and threatens a downside breach of the USD 7,500/t amid the firmer Dollar and risk-averse mood.

23 Sep 2022 - 08:55- Research Sheet- Source: Newsquawk