EUROPEAN COMMODITIES UPDATE: Crude edges higher, gold consolidates, and base metals take another beating

Analysis details (10:48)

WTI and Brent August futures are extending their modest gains in recent trade despite a lack of news flow to drive the price action following what has thus far been a range-bound week for the complex. WTI heads towards USD 106/bbl whilst Brent extends back above USD 111/bbl. However, to put prices into perspective, desks highlight that ICE Brent has declined over 8% since last Thursday, which in turn supported sentiment, although fundamentals in the complex remain supportive for prices. Analysts at ING highlight that the ICE Brent "Aug/Oct spread has traded out to a backwardation of USD 3.59/bbl, up from USD 2.81/bbl last Thursday… This suggests that there is tightness in the market right now, and we would expect this to only grow as we lose more Russian supply." Meanwhile, the EIA weekly petroleum report was delayed yesterday amid system issues, with an update on the release expected on Monday. Looking ahead to next week, OPEC+ will once again convene, although the meeting is expected to be a non-event after the group essentially carried out this month's decision in its prior meeting. At the June meeting, OPEC+ delegates agreed to hike output by 648k BPD in July and in August – with the September additions split across the two months. The meeting also comes against the backdrop of US President Biden's visit to Saudi Arabia – which is unlikely to deliver on any material measures to stabilise oil prices, with more and more eyes falling on OPEC spare capacity as the Declaration of Cooperating (DoC) approaches its end. Some suggest the meeting will likely see a more geopolitically leaning agenda. Over to metals, spot gold remains uneventful under USD 1,850/oz – with the Dollar similarly contained intraday thus far. Focus has turned to base metals, with nickel, zinc, and tin among the biggest losers amid demand woes and surplus concerns – with data from the International Lead and Zinc Study Group (ILZSG) suggesting the global zinc market flipped to a surplus in April vs a deficit a month earlier. Although, ING flags that LME "zinc inventories have come under pressure in recent days…This is the lowest level seen since at least 2000. The LME will likely be watching this closely, wanting to avoid a repeat of the squeeze seen in the nickel market earlier this year," the Dutch bank says. Citi, meanwhile, cut its zinc 0-3month point price forecast to USD 3,000/t (prev. USD 3,300/t), citing strong Chinese exports and weakening demand. Finally, copper prices remain well off recent levels, with the 3-month LME contract hovering around USD 8,300/t vs over USD 9,000/t this time last week. Citi sees copper marginal costs rising to USD 7,800-8,000/t during H2 2022 and says the recent price decline should tighten scrap supply.

24 Jun 2022 - 10:48- MetalsResearch Sheet- Source: Newsquawk