EUROPEAN COMMODITIES UPDATE: Crude firmer on China's monetary policy easing, US-China trade talks, and rising tensions between India and Pakistan

Crude Oil: WTI Jun +0.9%, Brent Jul +0.7%

• Firm trade across the crude complex (albeit with futures recently waning off highs) despite a relatively quiet market, softer Dollar pre-FOMC, and amid modest gains across most equity bourses, with the gains largely facilitated by developments overnight in trade, geopolitics, and with China loosening its monetary policy.


• In terms of trade, China's Ministry of Commerce confirmed US-China trade talks, whilst the report suggested US Treasury Secretary Bessent and Trade Representative Greer are to meet with China's lead representatives on economic matters later this week in Switzerland, while Bessent confirmed he is meeting the Chinese team on Saturday in Switzerland and said they agreed to talk on Saturday and will agree on Sunday what they are going to talk about.


• Recent geopolitical developments include Israel's plans for an expansion of its Gaza offensive, whilst India conducted a missile strike on 'terrorist infrastructure' in Pakistan, in turn ramping up tensions between the two nuclear-armed nations.


• In China, the PBoC loosened monetary policy in a bid to boost the economy ahead of US-China trade talks this week - PBoC Governor Pan announced a 50bps cut to the RRR, effective May 15th, which releases some CNY 1tln in liquidity, whilst the 7-day reverse repo rate was cut by 10bps.


• Elsewhere, in the US, the latest private sector inventory data showed a larger-than-expected draw in headline crude and gasoline stockpiles: US Private inventory data (bbls): Crude -4.5mln (exp. -2.5mln), Distillate +2.2mln (exp. -2.7mln), Gasoline -2.0mln (exp. -1.5mln), Cushing -0.9mln. Traders will be eyeing today's DoEs for confirmation.


• Sticking with the US, the EIA STEO sees world oil demand for 2025 at 103.7mln BPD (prev. 103.6mln BPD in the prior forecast) and for 2026 at 104.6mln BPD (prev. 104.7mln BPD).


• At the time of writing, WTI resides in a USD 58.94-60.26/bbl range while Brent sits in a USD 62.41-63.25/bbl parameter.

Precious Metals: Gold -1.4%, Silver -1.1%, Palladium U/C

• Spot gold reverted to beneath the USD 3,400/oz level with pressure seen shortly after futures trading resumed as markets were jolted by reports that US and Chinese officials are to conduct talks later this week in Switzerland.


• China's Ministry of Commerce confirmed US-China trade talks, whilst report suggested US Treasury Secretary Bessent and Trade Representative Greer are to meet with China's lead representatives on economic matters later this week in Switzerland, while Bessent confirmed he is meeting the Chinese team on Saturday in Switzerland and said they agreed to talk on Saturday and will agree on Sunday what they are going to talk about.


• Downside for the yellow metal is somewhat cushioned by the geopolitical developments after India launched air strikes on Pakistan and Pakistan-administered Kashmir under 'Operation Sindoor', targeting nine sites labelled as "terrorist infrastructure" in a "focused, measured and non-escalatory" manner. Pakistan retaliated with heavy shelling and claims to have shot down five Indian fighter jets. A Pakistani military spokesman also confirmed exchanges of fire at multiple points along the ceasefire line in Kashmir.


• Ahead, traders will be eyeing the latest FOMC policy announcement and Chair Powell's press conference. Attention will be on the Fed’s commentary regarding the economic impact of recent US tariffs and any guidance offered. The central bank is expected to maintain its wait-and-see stance as it monitors how tariffs affect economic data.


• Spot gold trades in a USD 3,360.20-3,422.14/oz range at the time of writing vs yesterday's USD 3,322.76-3,4335.06/oz parameter.

Base Metals: 3M LME Copper -0.6%

• Copper futures swung between gains and losses overnight and ultimately declined and remained subdued heading into European hours despite the PBoC's RRR and policy rate cut announcements, albeit following a short rally since the end of April.


• 3M LME currently resides in a USD 9,446.95-9,584.08/t range awaiting the FOMC in the absence of macro impulses.


• Conversely, Dalian iron ore futures rose to a two-week peak and ended daytime trade firmer by some 0.4% intraday, with traders citing China's latest stimulus measures.

07 May 2025 - 10:15- ForexGeopolitical- Source: Newsquawk