EUROPEAN COMMODITIES UPDATE: Crude cheers the OPEC+ announcement while iron ore continues to benefit from China’s property stimulus

Analysis details (09:49)

• 
  WTI July and Brent August contracts gapped higher upon the return of futures trading following the weekend OPEC+ deliberations (see below). Prices rose some 4% vs Friday’s close, but the upside dissipated as the APAC session went underway, with ongoing growth concerns cited among desks. The crude complex remained higher by some 1.5% intraday heading into the European cash open, before grinding higher as EZ PMIs underscored signs of growth in Q2 from the region, albeit also warned of sticky inflation. Furthermore, the Air industry body IATA is holding its AGM, with several industry and airline heads flagging higher demand. WTI reclaimed USD 73.50/bbl to the upside (vs 75.06/bbl overnight high) while Brent moved back above USD 78/bbl (vs USD 78.73/bbl overnight high) at the time of writing.


• 
  To recap the OPEC+ confab, Saudi Arabia announced it is to unilaterally cut an additional 1mln bpd of oil output for July - which sees its output drop to 9mln bpd. All other OPEC+ producers agreed to extend earlier cuts through to the end of 2024 - OPEC+ agreed for the output target for 2024 to be lowered by 1.4mln bpd and said Russia, Angola and Nigeria are to see significant production cuts in 2024. Meanwhile, the UAE sees a higher baseline for production curbs. Saudi’s Energy Minister said they are not targeting prices and that the extra voluntary cut is a precautionary measure, while they will keep the markets in suspense on whether the additional voluntary cut for July will be extended and will review the extra voluntary cuts every month. Russian Deputy PM Novak added they are seeing oil demand rising and they have the possibility of tweaking decisions. Furthermore, he said they will take decisions so that the oil market is stable, and that Russia is fulfilling its obligations in full, according to Reuters. White House officials meanwhile said they will continue to work with all fuel producers to ensure energy markets support US economic growth, according to Reuters.


• Over to metals, spot gold is subdued under USD 1,950/oz as the Dollar index remains firmer on the session – with the yellow metal finding support at its 100 DMA (1,939/oz) earlier in the European session. Base metals are mostly subdued but to varying degrees amid the aforementioned APAC growth concerns, although the complex has trimmed losses and trades off best levels, with 3M LME copper back around the USD 8,250/t mark, also weighed on by Peru’s April copper production rising 30.5% Y/Y. That being said, iron ore on Dalian and Singapore exchanges both extended gains to the highest in six weeks in continuation of the optimism felt after China’s property-market stimulus headlines on Friday.

05 Jun 2023 - 09:52- Research Sheet- Source: Newsquawk