EUROPEAN COMMODITIES UPDATE: Crude futures remain underpinned by Saudi verbal intervention and an improvement in sentiment

Analysis details (10:55)

• WTI and Brent October contracts have been edging higher since the resumption of futures trading overnight as APAC (and then European traders) reacted to verbal intervention from Saudi’s Energy Minister, who suggested OPEC+ may need to tighten output to stabilise the market and that the oil futures "disconnect" may force OPEC+ action. Furthermore, he stated OPEC+ will soon start work on a new accord for post-2022 and has the means to deal with market challenges including cutting production at any time and in different forms. The comments come amid the recent decline in oil prices as global growth slowdown is priced in alongside potential Iranian barrels. On that note, mixed Flash PMIs from the EZ and UK were released today, with the overarching theme being contracting growth in the EZ alongside less intense price pressures in the region. 


• Meanwhile, on the Iranian Nuclear Deal, Iran has dropped some key demands but gaps remain and it is not clear if there will be a deal, according to a US official cited by Reuters, who added the US will respond to proposal "soon". It's also worth remembering that agreeing to the EU proposal does not mean that an agreement has been made on the final text. Note, Reuters in March 2022 cited the Iranian oil minister saying domestic oil production capacity can reach its maximum less than two months after a nuclear deal is reached. Iran pumped an average of 2.4mln BPD in 2021 and plans to increase output to 3.8mln BPD if sanctions are lifted, with the National Iranian Oil Company (NIOC) chief also suggesting the possibility of over 4mln BPD by year-end. 


• Elsewhere, the Caspian Pipeline Consortium (CPC) noted that the only operating remote mooring device - VLU-3 - will be able to handle up to 3.5mln tons of oil per month vs CPC's maximum recorded monthly shipment of 6.4mln tons in March 2020, and vs the 5.026mln tons scheduled for August 2022. For reference, CPC is the main export route for Kazakh oil. WTI and Brent have just about reclaimed USD 92/bbl and USD 98/bbl at the time of writing, with added impetus from the gains across stocks. 


• Over to metals, spot gold is choppy under USD 1,750/oz and moving in tandem with the Dollar, whilst base metals are mixed but 3M LME copper maintains its head above USD 8,000/t.

23 Aug 2022 - 10:55- Research Sheet- Source: Newsquawk