EUROPEAN COMMODITIES UPDATE: Crude gives up earlier gains, gold mirrors the DXY, and industrial metals are boosted by Chinese PMIs

Analysis details (09:50)

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  WTI Apr and Brent May futures trade reversed earlier intraday gains after both benchmarked settled almost USD 1.50/bbl higher apiece yesterday. The overnight gains were a function of the weakening Dollar coupled with broader market optimism following the above-forecast Chinese NBS PMIs – which saw the manufacturing component at its highest since April 2012. This comes ahead of the China Two Session on the 5th March which will see the setting of a growth target. Analysts at ING say “Our China economist believes that the government will set a GDP growth target of 5.5% to 6% at the Two Sessions … This set of PMI data gives the government a very good reason to set a high growth target.” However, the upside for the complex is capped by the flimsy risk appetite in Europe alongside the much-larger-than-expected build in Private Crude Inventories (+6.2mln bbls vs exp. +0.5mln bbls), although the internals were less bearish for the complex. Participants look ahead to the official EIA release later today in which crude stocks are expected to show a build of 0.457mln bbls, but before that, the US ISM Manufacturing PMI may sway sentiment. Elsewhere, Goldman Sachs’ Head of Commodities Currie conducted an interview on Bloomberg TV in which he reiterated his view of oil above USD 100/bbl in Q4, whilst he still has high confidence in an oil price spike in 12-18 months, while suggesting the oil market will lose spare capacity as China comes back online. In terms of commentary from the East, Russian Deputy Energy Minister Sorokin said Russia has no intentions to sell its oil cheaply, and added the March oil production cut aims to balance pricing. Sorokin also said the price of Russian oil has to be determined by the market, and they will monitor the oil market before deciding on potential further production cuts. In recent trade, WTI Apr has dipped back under USD 76.50/bbl (vs high USD 77.74/bbl range), while Brent May tested USD 83.00/bbl to the downside (vs high USD 84.20/bbl range).


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  Nat gas futures are in the green on both sides of the pond, with US Henry Hub front-month futures consolidating on either side of the USD 2.75/MMBtu mark – technicians note that the recent close above the 21 DMA (USD 2.53/MMBtu) could prove to be technically bullish for the contract. Meanwhile, its Dutch TTF counterpart recoups some lost ground after falling further under EUR 50/MWh, with the May contract currently oscillating around USD 48/MWh.


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  Metals are firmer across the board amid the weaker Dollar. Spot gold resides in the middle of a USD 1,823.15-38.07/oz range, with the next clear upside level being the 22nd Feb high at 1,846.07/oz ahead of the USD 1,850/oz psychological mark. Base metals are buoyed by the optimism felt overnight as China’s official PMIs topped expectations across the board – 3M LME copper reclaimed a USD 9,000/t handle and briefly topped USD 9,100/t from a USD 8,932/t intraday low.

01 Mar 2023 - 09:53- MetalsData- Source: Newsquawk