EUROPEAN COMMODITIES UPDATE: Crude continues to slide while base metals remain subdued and spot gold is resilient

Analysis details (10:02)

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  WTI July and Brent August futures continue trundling lower as the post-OPEC pop faded, with prices now back at levels seen in the run-up to the weekend confab, with the former back under USD 71/bbl and closer to USD 70/bbl while Brent sits under USD 75.00/bbl at the time of writing. Complex-specific newsflow was light this morning, although looking at the chart, downticks in prices commenced shortly after the Reserve Bank of Australia’s surprise interest rate hike and as European players entered the market. Furthermore, some reports suggested Asian refiners are likely to take less oil from Saudi Arabia for July and buy more spot cargoes such as those from the UAE after the surprise price hike and output cut, according to Reuters citing traders – which coincided with more downticks in the crude complex at the time. On the flip side, Bloomberg suggested China has reportedly asked the largest banks to cut deposit rates to boost the economy, according to Bloomberg sources. Elsewhere, energy traders may be keeping one eye on the situation in Ukraine’s Kherson region, whereby the destruction of the Nova Kakhovka dam, and subsequent flooding which is posting a threat to the Zaporizhzhia nuclear power plant – some have framed it as having potential for a catastrophic consequence, whilst Ukraine also said the destruction of the Kakhovka dam will negatively affect global food security. Analysts at Citi suggest the Saudi cut is unlikely to raise oil prices into the high USD 80/bbl-low 90/bbl, and weak fundamentals are to lower prices by year-end. "We see average quarterly prices fairly range-bound for the year, averaging USD 81 for Brent in both H1 and H2 but with the potential to range between USD 72 and USD 90," Citi said in the note. That being said, UBS upped their forecasts to USD 95/bbl from USD 77.90/bbl, whilst also suggesting it expects one more Fed hike.


• Over to metals, spot gold is relatively steady around the USD 1,950/oz mark and within recent ranges as the yellow metal bides time for the next catalysts. Spot gold found some intraday support at the 10 DMA (USD 1,955.41/oz) after finding support near its 100 DMA yesterday (1,939.64/oz). Base metals are mostly softer with LME copper still hovering above USD 8,250/t following the recent gains as China looks to bolster its property sector. On that note, iron ore continued to benefit from these tailwinds and printed its highest levels in around seven weeks.

06 Jun 2023 - 10:06- Research Sheet- Source: Newsquawk