EUROPEAN COMMODITIES UPDATE: Crude and industrial metals recover as risk improves in Europe, while the FOMC and BoE loom

Analysis details (09:18)

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  Crude futures reversed overnight losses as risk in Europe tilted further to the upside as bank fears alleviate and with the FOMC and BoE expected to be less hawkish than previously envisaged following the recent banking saga. WTI May has risen back to levels around USD 68.50/bbl from its current intraday low of USD 66.90/bbl, while Brent May sits around USD 74.50/bbl from a USD 72.82/bbl low, after both benchmarked settled some USD 0.90/bbl higher apiece yesterday. Monday’s price action was choppy and direction was dictated by developments in the banking sector. Analysts at ING have also noticed timespreads weakening along with the flat price, and the ICE Brent spread has dropped to around USD 0.20/bbl. This decrease is attributable to reduced concerns over tightness in the physical market, likely due to Russia's better-than-expected oil supply and ongoing demand worries, the desk says. Ahead, aside from broader sentiment, market participants will be looking ahead to the FOMC for direction, with some expectations largely in the camps of either a dovish 25bps or a hawkish hold.


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  Gas markets are again mixed, Dutch TTF tilts lower but remains under EUR 40/MWh, with desks suggesting the heating season is nearing its end and EU storage levels at approximately 56%, it is expected that storage will end above 50%. Monitoring domestic consumption in response to the lower price environment could be in focus from a demand perspective. US Henry Hub meanwhile holds its head above USD 2.25/MMBtu.


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  Metals markets display a mixed picture. Spot gold retreated to a current USD 1,962.79/oz low from yesterday’s USD 2009.73/oz peak after finding resistance near the March 10th 2022 high (USD 2009.17/oz), with the pullback facilitated by an unwind in risk premiums as fears surrounding the banking sector simmer down ahead of the FOMC tomorrow. Base metals are now mostly firmer as risk improved despite a lack of fresh catalysts. 3M LME copper extends gains above USD 8,800/t after finding resistance at USD 8,700/t overnight. Finally, Reuters sources reported that China is considering cutting 2023 crude steel output by circa. 2.5%. This follows Bloomberg sources mid-March which suggested that China plans to cut crude steel production for the third consecutive year in 2023 to reduce carbon emissions in the heavily polluting sector - accounting for some 15% of national emissions. According to the Bloomberg piece last week, the government will also ban the creation of new steelmaking capacity.

21 Mar 2023 - 09:18- Fixed IncomeEU Research- Source: Newsquawk