EUROPEAN COMMODITIES UPDATE: Crude crumbles and base metals tumble amid China's COVID concerns and risk aversion

Analysis details (10:54)

WTI and Brent June contacts have continued to decline since the resumption of futures trading – with the key driver being China's zero-COVID policy in the face of rising cases in major cities Shanghai and Beijing. Beijing's Chaoyang district will require residents and workers to undergo three COVID tests this week, while Beijing ordered residents in a specific COVID-affected area in Chaoyang not to leave the area, according to Reuters. Meanwhile, the threat of war-induced recession also weighs on traders' minds, despite Germany's Ifo brushing aside the possibility of a German recession in Q1 or Q2. On the war front, Germany is still reluctant to abruptly end its dependency on Russian oil – seemingly the main factor that stands in the way of a complete and imminent European boycott. On this note, Reuters sources suggested that a shipping unit of TotalEnergies has charted a tanker to load Abu Dhabi crude in May for Europe – loading some 1mln barrels of Murban crude from the port of Jebel towards Britain. Elsewhere, the Iranian Foreign Ministry touched upon a couple of notable topics today. Firstly, Iran and the EU reportedly agreed to resume Nuclear Deal talks, although a time and date are yet to be decided. Meanwhile, Tehran also highlighted serious discussions with Saudi Arabia amid their dispute whereby an agreement could bring some stability to the Middle Eastern nations on either side of the Strait of Hormuz. WTI resides just north of USD 97/bbl (vs high 101.55/bbl) whilst its Brent counterparts meander around USD 101.50/bbl (vs high 105.85/bbl). Elsewhere, spot gold has been caged to a near-USD 5/oz range since the European open as the impact of a firming Buck negated the effects of lower yields at the time, which came after the yellow metal on Friday fell below both the 21 DMA (1,944.16/oz) and 50 DMA (1,938.53/oz). Base metals are in a sea of red as China's lockdown woes hit the demand side of the equation – with LME aluminium and zinc the laggards at the time of writing.

25 Apr 2022 - 10:54- MetalsResearch Sheet- Source: Newsquawk