EUROPEAN COMMODITIES UPDATE: Crude firmer, precious metals subdued, but base metals slip on tariffs and Chinese PMI miss

Crude Oil: WTI Mar +2.5%/Brent Apr +1.5%

• Firmer despite the broader risk aversion amid the announcement of Trump tariffs on Mexico, Canada, and China, with a warning also issued to the EU.


• WTI trades with firmer gains vs Brent this morning. Analysts at ING suggest this is given the importance of Canadian oil to US refineries. - "[Canadian] oil is a heavier crude, which many US refineries are configured to run on, particularly in the Mid-West. Given the importance of Canadian oil to the US, it is not surprising to see that WTI is trading stronger this morning."


• The desk adds that "Ultimately, given that Canadian producers have fewer alternatives than US refiners, means Canadian oil producers are likely to feel relatively more pain from these tariffs."


• Elsewhere, the OPEC+ JMMC meeting is to be held at 13:00 GMT / 08:00 EST, according to Kepler's Bakr.


• It is difficult to see any meaningful recommendations out of the JMMC after Trump's tariff imposition over the weekend, with the group unlikely to have had enough time to gauge the effects of the announcement.


• On that note, several OPEC+ sources suggested the group will not adjust its output plans for now since the crude market remains fragile and amid waning demand in China, according to Bloomberg sources - in-fitting with sources last week.


• WTI currently resides in a USD 73.48-75.18/bbl range while Brent sits closer to the top of a USD 75.94-77.34/bbl range.

Nat Gas: Dutch TTF -0.3%, US Nat Gas +6.7%

• Softer trade in EU prices while US prices surge following the imposition of tariffs from US President Trump.


• Analysts at Goldman Sachs suggested a potential tariff-driven decline in US natural gas imports from Canada is too small to significantly raise natural gas prices, while medium-run risks to oil prices are skewed downside because persistent broad tariffs would weigh and it expects limited near-term additional effects on global, Canadian, and Mexican crude prices.


• Elsewhere, it was reported that "There’s a consensus in the European Union that one way to mitigate trade tensions with the US will be by increasing energy purchases." CNBC source added, "there’s a realization that a trade confrontation with the EU is approaching".

Precious Metals: Gold -0.1%, Silver -0.6%, Palladium -0.3%

• Subdued by the rise in the Dollar on the back of the aforementioned US tariffs.


• Losses limited amid haven properties of precious metals.


• Spot gold clambered from overnight lows of USD 2,772.21/oz (vs high 2,806.27/oz) after printing an all-time-high on Friday at USD 2,817.21/oz.

Base Metals: 3M LME Copper -0.7%

• Lower across the board amid the dollar coupled with demand implications from Trump's tariff announcement over the weekend.


• Desks suggest that tariff threats have kept metals markets on edge since Trump’s presidential election win in November.


• "Tariffs are a major headwind to metals. Inflationary in nature, tariffs could limit interest rate cuts from the US Federal Reserve. At the same time, higher rates along with higher tariffs and greater geopolitical uncertainty will push up the dollar, providing headwinds to industrial metals demand. Tariffs are also likely to result in higher domestic prices in the US. For aluminium, tariffs will result in higher prices in the US, representing a significant upside risk to the US Midwest premium this year." according to ING.


• Add to that, Chinese Caixin Manufacturing PMI printed below forecasts - 50.1 vs. Exp. 50.5 (Prev. 50.5) - not faring well for the demand side. Caixin suggested that "rising uncertainty in international policies could worsen China’s export environment, posing significant challenges for the economy. In this context, macroeconomic policies must be well-prepared and adjusted promptly to adapt to evolving circumstances. Domestically, weak effective demand and sluggish consumer spending persist, underscoring the need for policies that boost disposable income."


• Elsewhere, it was reported China is to renew its pledge not to devalue the yuan to help its exporters, while it is to offer to reinstate Phase 1 as part of the opening bid for trade negotiations and plans to treat TikTok as a commercial matter in negotiations, according to WSJ.


• As a reminder, Mainland Chinese markets will return tomorrow from their Lunar New Year holiday.


• 3M LME copper resides in a USD 8,922.20-8,992.13/t range this morning - off worst levels seen in APAC hours.

03 Feb 2025 - 10:20- MetalsData- Source: Newsquawk