EUROPEAN COMMODITIES UPDATE: Crude and gold remain cautious after yesterday’s geopolitical risk unwind; Iron saw more support from potential strike action

Analysis details (08:43)

• WTI Dec and Brent Jan futures consolidated overnight after settling lower by USD 3.23/bbl and USD 2.85/bbl respectively on Monday, paring all of Friday’s gains and more after an unwind of some of the geopolitical risk that had been baked in amid a lack of any major regional escalation over the weekend amid Israel’s slower-than-expected incursion into Gaza. That being said, desks highlight geopolitical risks that remain elevated with the short-term outlook at the helm of developments in the Middle East. Risks to Iranian supply remain the most obvious factor, as the country could see between 500k-1mln BPD of lost supply if the US strictly enforces sanctions again, says ING. Tensions in the Middle East thus far have not impacted oil flows – “In the absence of supply disruptions from the region, it is difficult to see a significant and sustained upside in prices”, the Dutch Bank says. On that front, reports this morning suggested Yemeni Houthis launched a drone towards Israel and was intercepted by the IDF over the Red Sea, with a Houthi spokesperson set to make an “important statement” in the coming hours – hence headline risk is present in the event of an escalation. Overnight, the Chinese PMIs painted a weaker demand picture, with the NBS Manufacturing metric falling back into contraction at 49.5 from 50.2 despite the recently telegraphed stimulus. Ahead, Brent Dec 2023 futures expire whilst the weekly Private Inventories will be released at 20:30GMT today on account of the narrowed LDN-NY time gap. 


• Currently, WTI Dec resides just under USD 83/bbl (in a USD 82.29-83.17/bbl range) while Brent Jan trades around USD 87/bbl (in a USD 86.30-87.22/bbl parameter).


• Over to metals, spot gold is flat intraday after seeing a similar geopolitical risk premium unwind as crude prices did yesterday, with the yellow metal back under USD 2,000/oz and finding overnight resistance at 1,999.28/oz and a floor at 1,990.62/oz after briefly dipping under yesterday’s USD 1,990.97/oz low. Prices remain well within Friday’s USD 1,976.92-2,009.57/oz parameter. Base metals are mixed although modest gains can be seen across the industrial metals, with 3M LME copper around session highs above USD 8,150/t, while Dalian iron ore prices saw further strength overnight after the rally on Monday with some desks citing Chinese optimism, whilst ING suggests that “there are also growing supply risks, namely, potential strike action in Australia. Train drivers at BHP operations in Western Australia voted in favour of taking protected industrial action. The current agreement covers about 500 train drivers carrying iron ore from BHP’s Pilbara mines around Newman to Port Hedland. Hence, any strike action could lead to supply disruptions.”.

31 Oct 2023 - 08:43- MetalsEU Research- Source: Newsquawk