EUROPEAN COMMODITIES UPDATE: Crude consolidates but zinc piggybacks its Shanghai counterpart’s trade

Analysis details (10:54)

WTI and Brent front-month futures have been consolidating since the US afternoon yesterday after the complex gained on Russia-Ukraine tensions. So far, the recent rhetoric has been that negotiations have stalled, whilst reports suggested Russia has used chemical weapons. Since the start of the war, Germany has suggested the use of chemical weapons would push them toward a ban on Russian oil, although little has been heard of this aside from plans to “phase out” Russian energy. Note, Germany's leading economic institute suggested that a Russian energy supply freeze would cause a recession in Germany in 2023. Elsewhere, overnight reports suggested the Russian Energy Minister said Moscow is ready to sell oil and oil products to friendly countries in any price range and that oil prices in the range of USD 80-150/bbl are in principle possible, while he added the task is not to guess how much prices will be but to ensure industry functions, according to Interfax citing Izvestia. It is worth remembering that 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. Sticking with geopolitics, China’s CNOOC is said to be considering exiting operations in Britain, US and Canada amid tensions with the West, according to Reuters sources. The morning also saw the IEA report, which lowered its 2022 global oil demand estimate by 260k BPD (vs 500k reduction by OPEC). Russian oil supply is expected to fall by 1.5mln BPD in April and by around 3mln BPD from May, whilst roughly 700k BPD of Russian oil production has been shut in thus far in April, according to reports cited by the IEA. WTI May hovers around USD 101/bbl and Brent June around USD 105/bbl – both within tight parameters. Spot gold trades with modest gains around USD 1,975/oz and close to yesterday’s USD 1,978.21/oz peak. Metals, in general, vary with nothing too interesting to mention, although LME zinc outperforms as Shangahi zinc rose to a 15yr high amid traders citing supply risks and better demand prospects.

13 Apr 2022 - 10:54- EnergyResearch Sheet- Source: Newsquawk