EUROPEAN COMMODITIES UPDATE: Commodities slide amid a firmer Dollar and recession woes

Analysis details (10:46)

Price action in the crude complex reflects the downturn in sentiment seen since the European session commenced. WTI and Brent's front-month futures have been declining with the former back under USD 109/bbl but with the absence of a settlement yesterday, whilst Brent resides around USD 112/bbl after a firmer settlement yesterday. There has been little in terms of newsflow to drive price action but the COVID situation in China remains a wildcard. Citi says in the scenario of a recession, crude oil prices could drop to USD 65/bbl by end-2022 and USD 45/bbl by end-2023, assuming the absence of OPEC+ intervention and a decline in short-cycle oil investment. In terms of the detailed forecasts, for Brent, Citi sees Q3-2022 at 99/bbl, Q4-2022 at 85/bbl, 2022 at 98/bbl, and 2023 at 75/bbl. For WTI, Citi sees Q3-2022 at 94/bbl, Q4-2022 at 81/bbl, 2022 at 95/bbl, and 2023 at 72/bbl. The morning also saw source reports suggesting Aramco raised its OSPs across all regions. Sticking with producers, Russia’s Kremlin said no decisions have been taken regarding switching Russian LNG sales to RUB, following reports yesterday which suggested Russia is looking at asking for RUB for LNG exports. At the moment, the RUB payments only apply to pipeline gas and not LNG exports. Elsewhere, NatGas has gained focus amid the Norwegian oil & gas sector strikes. “Strike action in Norway is set to escalate over the course of this week, which could ultimately see nine oil & gas fields having to shut According to Reuters, this could lead to around 15% of Norwegian oil output being shut… if the strike action continues to escalate as planned, it could see almost a quarter of Norwegian gas output shut.”, according to the commodities desk at ING. Dutch TTF prices have been rising for another session after rallying over 10% yesterday. Metals are mostly subdued across the board as a function of the Dollar – with spot gold threatening a test of USD 1,800/oz, whilst base metals falter on the recession risks, with LME cooper now under USD 8,000/t.

05 Jul 2022 - 10:45- EnergyResearch Sheet- Source: Newsquawk