EUROPEAN COMMODITIES UPDATE: Commodities steal the spotlight but raise inflation concerns

Analysis details (11:06)

Russia-related commodities have once again stolen the overnight headlines as WTI and Brent front-month contracts surged to highs of USD 130/bbl and almost USD 140/bbl respectively on several bullish factors for the complex. Firstly, US Secretary of State Blinken said the US is working with its allies in Europe to look into the possibility of banning Russian oil imports in an effort to further punish the country. Details remain light but Europe has an estimated 30% of its oil and 39% of gas supplies coming from Russia, the US imports far less. “Europe’s dependence on Russian oil imports, of c. 4.3 mb/d of which 0.8 mb/d comes from pipeline, suggests that such a coordinated response will likely take time, leaving the possibility for only a US ban in short order”, analysts at GS says. Overall, GS believes of a “modest fundamental impact yet another deterrent for potential buyers”. Secondly, Iranian nuclear talks have been delayed by last-minute proposals from Moscow – with Iranian officials suggesting the outlook for Vienna talks remain unclear. Libya's state-owned oil firm NOC said 330k BPD of crude production has been shut in across the El Sharara and El Feel fields in western Libya. Finally, the Chinese GDP target from the “two-session” was set at a more-ambitious than expected “around 5.5%”, vs exp “5.0-5.5%”; thus adding to the demand side of the equation. Sticking with energy, gas prices have also been surging – with the Dutch TTF May contract +60% at one point. Sticking with Russia-related commodities, LME Nickel is currently +28% close to USD 40k/t, with palladium, zinc and copper also firmer whilst wheat futures hit limit up overnight. For context, Russia holds over 30% market share in Europe for both natural gas and oil, alongside a large market share of total exports in nickel (~49%), palladium (~42%), aluminium (~26%), and platinum (~13%), whilst it also exports steel (~7%) and copper (~4%). Over to precious metals, haven flows saw spot gold and silver briefly top USD 2,000/oz and USD 26/oz respectively, with prices veering back towards those levels in recent trade.

07 Mar 2022 - 11:05- MetalsEconomic Commentary- Source: Newsquawk