EUROPEAN COMMODITIES UPDATE: Crude consolidates pre-OPEC and Gold meanders near USD 1,900/oz

Analysis details (10:47)

WTI June and Brent July futures trade flat on the day in relatively contained trade, with the former just under USD 108/bbl whilst the latter around USD 110/bbl ahead of the OPEC+ confab. The meeting time has been trimmed from one hour to just half an hour, intimating a drama-free meeting. The JMMC and OPEC+ will meet on May 5th at 12:00BST/07:00EDT and 12:30BST/07:30EDT respectively. The group is expected to maintain its policy of upping total output by around 432k BPD in June – which, under the terms of the pact, has been marginally increased from 400k BPD as of May. The meeting comes against the backdrop of several factors, including supply woes from the Russia-Ukraine conflict (and subsequent sanctions), dented demand from China’s COVID situation, and underproduction from some OPEC+ nations. A delegate cited by S&P Global recently suggested "We are not currently seeing strong demand and supply tensions that would lead OPEC+ to change its supply policy… we do not have clear visibility on the impact of the confinements in China on oil demand and Russian production.” From a more diplomatic perspective, the elephant in the room will be Russia, but it is in the group’s best interest to maintain a sound relationship with Moscow. Another smooth and drama-free meeting (at least at face value) is expected. Aside from that, geopolitics will remain the next driving force (assuming China does not introduce any stricter COVID lockdowns). OPEC+ sources cited by Energy Intel believe geopolitics is the main factor behind the higher prices as opposed to a physical market imbalance. Meanwhile, a delegate via S&P Global said there are “no concerns about prices”. The main issue here is the depleting demand for Russian crude. The EU on Wednesday unveiled its sixth Russian sanctions package, which will involve a complete import ban on all Russian oil; seaborne, pipeline, crude and refined fuels, with a halt of crude purchases within six months and a halt to refined fuel purchases by year-end. Further, sources suggested Hungary and Slovakia will receive an extended phase-out period which will likely last until end-2023 under existing contracts, according to sources via Reuters and chiming with reports via Bloomberg and CNBC. EU members are still debating some details according to Bloomberg sources. Additionally, Bulgaria's Deputy PM said they would seek an exemption if the EU agreed to allow exemptions on any embargoes Russian oil - which could further complicate the finalisation of the sanctions package (full Newsquawk primer available on the Newsquawk Headline feed). Elsewhere, spot gold failed to sustain gains above USD 1,900/oz in early European hours following Wednesday's USD-induced upside. Base metals are broadly firmer following China’s return to markets and the less-hawkish-than-feared Fed, but the complex continues to face uncertainty from China’s COVID situation.

05 May 2022 - 10:46- EnergyGeopolitical- Source: Newsquawk