EUROPEAN COMMODITIES UPDATE: Complex pressured amid the broader risk tone and accompanying USD strength

Analysis details (10:51)

• Crude benchmarks remain under pressure after slipping during APAC trade in-fitting with the broader risk tone and have been unable to stage any form of recovery this morning, despite equity performance being much more contained in comparison. Metals feature marked pressure in spot gold with the stronger USD offsetting any potential haven demand that may typically have been expected from the current tone, a tone which is weighing on base metal peers.


• For crude, action thus far has seen WTI Dec’23 and Brent Jan’23 lose the USD 80/bbl and USD 84/bbl handles respectively, action which pushes the benchmarks to multi-month lows with support seen around USD 78/bbl mark in WTI from late-August. As mentioned, the pressure seen thus far is much more pronounced than what we are seeing in other asset classes and is likely a function of a few factors. Firstly, the referenced firmer USD is weighing on the commodity space across the board and it will be interesting to see how this dynamic develops as we move into the week’s docket of US issuance, particularly if any marked concession and associated yield moves occur. Secondly, the overnight remark from Israel’s PM Netanyahu that he is now open to “short pauses” in Gaza, but has ruled out a ceasefire. Such commentary has potentially driven a further paring back of the geopolitical premium around the conflict, in a continuation of the move that was seen after Friday’s lengthy Hezbollah speech that didn’t spark any pronounced escalation of the conflict in the immediate-term. However, it is worth remembering that Nasrallah is expected to give another speech at a yet to be announced point that will focus on the longer-term view of the conflict. Elsewhere, recent remarks from the OPEC SecGen have focused on actions taken through 2023 with Al Ghais adding that oil demand is set to grow by over 2mln BPD in 2024.


• Moving to metals where both precious and core counterparts are pressured given the USD and risk tone respectively. For XAU, action has taken the yellow metal to multi-session lows of USD 1964/oz and thus below the USD 1985/oz 10-DMA to within reach of the USD 1955/oz 21-DMA. Their base metal peers are also in the red with losses of a larger magnitude given downside in precious metals is perhaps slightly cushioned by the mentioned tone. Notably, base metals are pressured after the Chinese trade data overnight though reaction at the time was minimal, the details of the release showed a surprising lift in imports for October at 3.0% Y/Y (exp. -4.8%, prev. -6.2%) which speaks favourably to domestic demand. However, the accompanying export metric was much softer than expected at -6.4% Y/Y (exp. -3.3%, prev. -6.2%) which is a potential point of concern for domestic GDP.

07 Nov 2023 - 10:50- MetalsEU Research- Source: Newsquawk