EUROPEAN COMMODITIES UPDATE: Crude consolidates, but metals edge higher as the Buck remains subdued

Analysis details (10:38)

WTI and Brent July futures consolidate in early European trade in what has been another volatile week for the crude complex amid fluid fundamentals. On China's COVID front, the situation remains mixed and perhaps less optimistic than some had hoped – with the demand side of the equation at the helm of China's Zero-COVID policy, Beijing maintains further tightened curbs in particular districts. Reports earlier this week also suggested that China replenish its oil reserves with Russian crude, although details on terms and volume are reportedly not decided yet. As a reminder, SGH Macro advisors, on March 25th, citing sources, suggested Russia offered Beijing oil at around USD 70/bbl, to be settled directly in Yuan and Rouble. There is little to update on the Russian oil embargo – member states are yet to hash out a deal. However, according to the FT, Hungary's largest oil refiner MOL is reportedly preparing to refine non-Russian oil. The article suggests that it could be a sign Hungary may be easing resistance to an EU embargo on Russian oil. Moving on, the Iranian nuclear deal remains a roadblock as Iran attempts to leverage more concessions from Washington. Elsewhere, desks have been flagging the narrowing of the Brent/WTI arb ahead of the upcoming US driving season. ING also writes that "we could see US crude exports coming under pressure given the narrowing that we have seen in the WTI/Brent discount. The July WTI/Brent discount narrowed to less than US$2/bbl at one stage this week, after starting the month at more than a US$4/bbl discount." Ahead, next week will see commentary from IEA's Birol and the Saudi Energy Minister at Davos, although the pair is unlikely to say much that shift the dial. WTI resides around USD 109.50/bbl, and its Brent counterpart is flat at just under USD 112/bbl. On to metals, spot gold has been moving in tandem with the Buck and rose back above its 200 DMA (at USD 1,838.70/oz today) before matching yesterday's USD 1,849/oz peak. Base metals are mostly firmer, with LME copper re-eyeing USD 9,500/t to the upside as the red metal is poised for its first weekly gain in seven weeks – with traders citing demand revival alongside a retreat in the Greenback. Meanwhile, iron ore futures rose over 5% in China and Singapore following the larger-than-expected 5yr LPR cut by the PBoC overnight.

20 May 2022 - 10:38- EnergyResearch Sheet- Source: Newsquawk