EUROPEAN COMMODITIES UPDATE: Crude consolidates while NatGas holds most of its gains and precious metals move sideways

Analysis details (10:43)

WTI Mar’ and Brent Apr’ have been somewhat choppy since the resumption of futures trade, although in the grander scheme, prices are consolidating just off recent highs with Brent around USD 89.00/bbl and WTI around USD 87.50/bbl. The complex continues to hold geopolitical premium in the run-up to the OPEC meetings this week – with the JTC slated for tomorrow and the decision-making OPEC+ confab on Wednesday. The group is expected to continue with its plans to up its output quota by 400k BPD. The meeting comes against the backdrop of heightened geopolitical tensions – namely on the Russia/Ukraine front – with Brent front month futures climbing above USD 90/bbl as a result. Delegates have downplayed the significance of the price given that it is a function of increasing geopolitical risk premium as opposed to strengthening fundamentals. Another point of concern would be the underproduction by some African OPEC nations dragging down real production – with the latest OPEC MOMR outlining Nigeria and Angola as the main culprits. All in all, the meeting is currently expected to be a smooth affair. Back to geopolitics, it’s worth bearing in mind that Russia holds over 30% of the market share in Europe for both natural gas and oil. To alleviate some of this threat, the US said it is engaging with LNG suppliers to manage storage and diversion to Europe if needed. However, Saudi Arabia, Kuwait and Iraq would struggle to cover the shortfall in crude supply created by a blanket ban on Russian energy exports as they have already allocated their annual term supplies, according to Argus sources. Qatar will meet with President Biden today, with the meeting expected to discuss Iran, European energy supplies, Afghanistan, Investment cooperation, and arms sales. On that note, NatGas futures soared at the open on the Russia/Ukraine risk to global supply. Sticking with geopolitics and regarding Iran, there has been some positive noise surrounding nuclear talks last week, although commentary from Tehran today suggest sticking points over sanctions. The sides paused talks over the weekend for deliberations with state leaders, talks are poised to resume this week. Over to metals, spot gold trades sideways below USD 1,800/oz ahead of a risk-packed week, with the 100 DMA seen at USD 1,795/oz. LME copper meanwhile has seen a mild rebound from the USD 9,500/t with the red metal lacklustre overnight amid the absence of Chinese participants ahead of the Lunar New Year.

31 Jan 2022 - 10:42- EnergyResearch Sheet- Source: Newsquawk