EUROPEAN COMMODITIES UPDATE: Commodities remain subdued despite a softer Dollar and Chinese stimulus source reports

Analysis details (10:24)

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  WTI and Brent front-month futures are tilting firmer on the back of source reports that China is mulling new stimulus and higher deficit to meet growth target, according to Bloomberg. Before that, prices were consolidating after holding onto a bulk of its geopolitical-induced gains, which ultimately resulted in both contracts settling higher by over USD 3.50/bbl apiece, albeit off best levels. Oil prices jumped higher on Monday as traders baked in a geopolitical risk premium after the conflict in Israel. While Israel is not a key energy producer, the concern lies in the issue engulfing the broader Middle East and its key producers. For instance, WSJ reported on Friday that Saudi Arabia had told the White House it is willing to raise oil output early next year as part of a rapprochement deal with Israel, but the weekend's events now put that deal at risk. Iran's production and export capacity also could be at risk if the US decides to ramp up its sanctions enforcement if it determines its involvement in the recent attacks is substantial. These are all potential future risks the market is weighing up, but for now, there is no immediate effect from the conflict. Back in European trade, the aforementioned China reports briefly tilted prices into the black amid the prospect of higher demand. These source reports also followed the IMF’s quarterly forecasts which cut its China and the EZ 2023 and 2024 forests, while US forecasts were maintained – no notable crude move was seen on the back of the IMF report. WTI Nov trades around USD 86.50/bbl (vs low 85.30/bbl) while Brent Dec sits around USD 88/bbl (vs low 87.11/bbl). Sticking with energy, Dutch TTF prices continue to grind higher, +3.6% at the time of writing and north of EUR 45.50/MWh, with desks citing tailwinds from the crude complex coupled with the revived Australian LNG strikes at Chevron facilities in the run-up to the winter heating season.


• Over to metals, spot gold is flat/tilting lower after Monday’s risk premium led to intraday gains of almost USD 30/oz in the yellow metal. Spot gold remains north of USD 1,850/oz and eyes several Fed speakers on the docket in the absence of tier 1 data, while geopolitical headline risks remain amid the unrest in Israel and Russia’s increasing nuclear-testing rhetoric. Base metals are mostly softer with participants citing a gloomy growth outlook coupled with property concerns in China. Industrial metals clambered off worst levels following the aforementioned Chinese stimulus sources, but LME copper still holds onto losses of some 0.9% intraday. Meanwhile, it was reported China's largest copper buyers expect to pay a premium around USD 90/t for Codelco's copper, according to Reuters sources. Onto steel, the EU reportedly plans an anti-subsidy probe into Chinese steelmakers at a summit with the US on October 20th, according to FT citing sources, while India’s JSW Steel noted lower production amid market conditions. Iron ore saw its pullback deepened with Dalian futures hitting their worst level in 6 weeks. Other steelmaking ingredients were also under heavy pressure with coke and coking coal both sliding in excess of 6%.

10 Oct 2023 - 10:36- MetalsEU Research- Source: Newsquawk