EUROPEAN COMMODITIES UPDATE: Crude encounters sharp selling but metals maintain composure

Analysis details (10:59)

WTI and Brent front-month futures have been extending on losses throughout the European morning with the market mood somewhat cautious and the geopolitical updates abundant. Prices saw a sharp turn lower sending the benchmarks lower by some USD 2/bbl at one point. Fresh newsflow was light at the time but from a technical standpoint, prices found buyers toward the bottom of the respective trend channels. Back to geopolitical updates and on the Russia/Ukraine front, the French President has been voicing progress regarding his meeting with the Russian President – albeit, the Kremlin suggested the sides failed to strike a deal (as expected). The French President will be meeting with the Ukrainian head later today. That being said, and despite the string of upcoming diplomatic meetings, the focus remains on Russia’s thoughts on the US response to Russian security proposals; Kremlin previously suggested that this will determine Russia’s stance. Elsewhere, Iranian nuclear talks are poised to resume later today in Vienna. Despite the recent US concessions, Iran has been sounding less optimistic today vs yesterday regarding a deal, and suggested an interim deal is not what Iran is seeking. Sticking with geopolitics, the Chinese Foreign Ministry expresses its opposition to the US’ equipment sale to Taiwan after Washington approved a USD 100mln sale for Taiwanese missile upgrades. In terms of demand-side updates, travel and tourism company TUI noted strong booking momentum across all markets with new bookings for summer 2022 now above pre-crisis levels – with customers willing to pay higher prices. Meanwhile, BP alongside their earnings "expects oil supply and demand to move back into balance through 2022; however, with lower levels of spare capacity price volatility is likely". Price action today will likely be dictated by geopolitics barring any other major macro updates. Elsewhere, spot gold meanders around its 21DMA (1,818/oz) with downside levels including the 200 DMA (1,806/oz) and 50 DMA (1,804/oz) ahead of the psychological mark. LME copper prices are modestly softer – in fitting with the broader tone across risk assets. On the supply side, recent reports suggest mining activity at Peru's Las Bambas copper mine (which accounts for 2% of global supply) tumbles amid a protestor blockade. On Monday, the operator warned it might have to halt operations if the blockade is not lifted by February 20th. Overnight Thermal coal futures jumped 10% and hit limit-up traders citing some stockpiles at Chinese ports surprisingly contracting.

08 Feb 2022 - 10:58- MetalsGeopolitical- Source: Newsquawk