EUROPEAN COMMODITIES UPDATE: Crude climbs as China reopens and geopolitics factor

Analysis details (10:50)

• Crude benchmarks are bid this morning, with WTI Feb and Brent Mar posting upside in excess of 3.0% or USD 2.0/bbl respectively. Action has been driven by China’s ongoing reopening and fresh geopolitical headlines, alongside other crude-specific developments; developments which include Iraq’s Basrah medium crude OSPs being set at a discount vs Oman/Dubai and Dated Brent to Asia and Europe respectively alongside reports that China has issued a second batch of 2023 oil import quotas.


• On the main points, China’s reopening continues with its border now open to international travellers for the first time since March 2020, while a negative PCR test remains a requirement quarantine is no longer necessary. An easing of restrictions that occurs as we head towards the key Lunar New Year holiday and travel period, which is expected to spur domestic activity – though, observers remain concerned about the potential COVID ramifications of the holiday period. Regarding geopolitics, Ukraine over the weekend said that Russia did not observe its Christmas ceasefire (in-fitting with the Julian calendar) with Russia subsequently claiming it retaliated for earlier action by striking a building and killing over 600 Ukrainian troops. However, Ukraine has denied any casualties saying that only civilian infrastructure was damaged.


• Returning to price action, the upside in the crude benchmarks outlined above still leaves WTI over USD 5.0/bbl shy of last week’s USD 81.50/bbl peak, with a similar gap in Brent.


• Moving to metals, spot gold is fairly contained around the mid-point of USD 1864-1880/oz parameters, with the yellow metal deriving some upside from the DXY struggling to attain a positive foothold. Though, today’s high marks a fresh multi-month peak as it takes out the June 13th USD 1877/oz high that was in focus last week, the next resistance mark is USD 1885/oz from the 9th of May.

09 Jan 2023 - 10:45- EnergyEU Research- Source: Newsquawk