EUROPEAN COMMODITIES UPDATE: Crude continues to slump while XAU surpasses USD 1850/oz

Analysis details (10:50)

• Another downbeat session for the crude space after the complex settled lower by over 3% on Tuesday. Since then, WTI Feb’23 and Brent Mar’23 have declined to lows in proximity to the USD 75/bbl and USD 80/bbl handles respectively. Downside that has occurred amid relatively limited fresh newsflow, with broader macro action dominated by the EZ inflation narrative as the French numbers were softer than expected, following Germany and Spain, ahead of Friday’s EZ-wide print.


• While fresh developments explicitly for the complex have been limited, desks continue to focus on China’s accelerated reopening. On this, Oxford Economics takes the view that the relatively hasty reopening will exacerbate strains on the domestic economy and as such they have revised down their near-term growth forecasts, while lifting subsequent quarters. A view which follows the recent underperformance in Chinese data, with the recent NBS PMIs a timely example, and is perhaps factoring into the marked downside of over USD 5.00/bbl in the aforementioned benchmarks WTD; albeit, the complex remains around USD 3.00/bbl from December’s trough.


• For metals, spot gold has successfully eclipsed the USD 1850/oz mark, for the first time since mid-June 2022, upside which is being spurred by a pullback on the USD with the index sub-104.00. As such, the yellow metal continues to lift from the key DMAs and technically the next point of resistance is the June 13th high at USD 1878/oz vs today’s USD 1865/oz peak.


• Elsewhere, the complex is attentive to developments between Australia and China as the Chinese State Planner has allowed a handful of gov’t back utilities and the key Baowu Steel Group to resume coal imports from Australia, following an unofficial ban in 2020.

04 Jan 2023 - 10:45- MetalsEU Research- Source: Newsquawk