EUROPEAN COMMODITIES UPDATE: Commodities supported by the post-Fed dollar, but industrials outpace on risk appetite and Chinese stimulus hopes

Analysis details (09:53)

• WTI and Brent futures are firmer intraday, with the complex propped up by the broader risk appetite and softer Dollar in the aftermath of a dovish FOMC hike, whilst Chinese stimulus hopes keeps prices underpinned. On the OPEC front, as July comes to an end, traders are keeping an eye on whether Saudi Arabia will opt to extend its voluntary 1mln BPD cuts for yet another month into September after initially announcing the cuts just for July, and then extending it for August. The initial announcement and the first extension were announced via state media in the first week of the respective months, thus trades and analysts are on guard until at least the first week of August. According to a Bloomberg survey, 15 of 22 traders expect the Kingdom will continue the cuts into September. That being said, there are also arguments for Saudi tapering the voluntary cuts to either 750k BPD or 500k BPD – given the hit to the Kingdom’s balance sheet and the recent recovery in prices. Six respondents who participated in the Bloomberg survey suggest this, alongside the expected supply shortfall expected in H2, could encourage Saudi to restore between 250k-500k BPD of the halted production. OPEC+ is poised to hold an online meeting on Aug. 4 to assess oil market conditions, whilst the next “decision-making” minitrial meeting is due to meet in late November. WTI September resides around USD 79.50/bbl (in a USD 78.87-79.75/bbl range) while Brent October oscillates around USD 83.00/bbl (in a USD 82.65-83.43/bbl parameter.)


• Over to metals, spot gold benefits from the softer post-FOMC Dollar, with the index posting mild gains intraday thus far but ultimately above its 100 DMA (USD 1,965.89/oz) after meandering around the moving average earlier this week. Base metals also benefit from the weaker Buck, but also see tailwinds from the broader risk appetite and ongoing hopes of Chinese stimulus, with China this morning warning domestic consumption is not strong enough, whilst analysts cited by China’s Securities Times expect continued property market support throughout H2. 3M LME copper trades around USD 8,650/t after earlier testing USD 8,700/t to the upside. Sticking with copper, Chile's Cochilco sees average copper prices at USD 3.85/lb in 2023 (prev. forecast of USD 3.90/lb).

27 Jul 2023 - 09:54- MetalsResearch Sheet- Source: Newsquawk