EUROPEAN COMMODITIES UPDATE: Commodities underpinned by Chinese optimism whilst crude also eyes OPEC+

Analysis details (10:40)

WTI and Brent Jan futures have been trending higher since the APAC session on speculation China could that China could ease its COVID restrictions, although the Chinese health officials instead boosted the vaccination drive for the elderly and stressed they must keep avoiding excessive COVID curbs. Furthermore, the crude complex may have received further tailwinds overnight from the support measures recently announced for the Chinese property sector. This all comes in the run-up to the JMMC and OPEC+ confabs this weekend, with participants split as to whether the group will maintain current production targets or opt for a cut. JP Morgan said OPEC+ is likely to keep production quotas steady on Dec 4th, but a physical output cut of 250k to 500k BPD may be floated, depending on the demand outlook, and OPEC+ will retain the option to review quotas with an additional meeting in January. Ten out of 16 respondents polled by Bloomberg expect target cuts, with forecasts ranging from cuts of 250k to 2mln BPD. Sources meanwhile have been quiet thus far. Over in Europe, WSJ’s Norman suggested that EU27 Russian oil price cap discussions will not resume today at the ambassadors level. Russian Deputy PM Novak spoke on the topic earlier and said a price cap on Russian oil may lead to a market deficit, whilst also noting that Russia is discussing with Kazakhstan and Uzbekistan a gas union for shipments, which would include shipments to China. WTI Jan resides (at the time of writing) around USD 79.50/bbl (vs low 76.29/bbl) near session highs whilst its Brent counterpart trades north of USD 85/bbl (vs low 82.39/bbl). Over to metals, spot gold trades in tandem with the Dollar and remains within recent ranges on either side of USD 1,750/oz ahead of key risk events later this week. Base metals are lifted by the overnight China COVID optimism alongside support measures announced for China’s property sector – in turn boosting demand for raw materials – with 3M LME copper back on a USD 8,000/t level and extending on gains.

29 Nov 2022 - 10:40- Research Sheet- Source: Newsquawk