EUROPEAN COMMODITIES UPDATE: Crude jumps on OPEC’s surprise move ahead of JMMC; metals are capped by the firmer Dollar

Analysis details (09:47)

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  WTI May and Brent June futures gapped higher by almost 7% at the reopen of futures trading after OPEC countries, in a surprise move over the weekend, announced coordinated voluntary production cuts. The de-facto head of Saudi Arabia suggested the move was "a precautionary measure aimed at supporting the stability of the oil market," according to Energy Intelligence. The total cuts announced by OPEC amount to 1.157mln BPD (from May through to the end of 2023), and with Russia's previously announced 500k BPD, this equates to an OPEC+ tally total of 1.657mln BPD. The Joint Ministerial Monitoring Committee (JMMC) is slated to meet at 11:00 BST/06:00 EDT to discuss current oil market conditions and the outlook (Full preview available on the Newsquawk research suite). The meeting was initially expected to be a non-event. The confab will now be eyed for more clarity as to why members opted for an emergency policy change after delegates and sources last week suggested the continuation of the current policy, while the Saudi Energy Minister last month said the production targets are "here to stay for the rest of the year, period." Following the cuts, Goldman Sachs raised its Brent crude price forecast by USD 5/bbl to USD 95/bbl for December 2023 and to USD 100/bbl (previously USD 97/bbl) for December 2024. JP Morgan said the OPEC cuts are already reflected in their price view and still sees Brent averaging USD 89/bbl in Q2 2023, before rising to USD 94/bbl in Q4 2023, and finishing around USD 96/bbl. Bank of America maintained its Brent forecast of USD 90/bbl in H2 2023 but suggests it is still unclear how much of the planned cuts will lead to actual volume reduction. "OPEC is no longer afraid of a major US shale oil supply response if Brent crude oil prices trade above USD 80/bbl, so cutting volumes to push oil prices higher does not carry the same risks it did five years ago," the desk said. The White House said the OPEC+ decision was "ill-advised under current market conditions" and added that the administration will work to ensure energy markets support economic growth and lower prices for American consumers. Elsewhere, Reuters sources reported that Russia’s Rosneft and Indian Oil Corp adopted the Dubai benchmark in their new deal, reflecting Russia's shift towards Asian oil sales after Europe rejected its oil. The Asia-focused Dubai benchmark is gaining prominence over the European-dominated Brent, as Asia becomes the largest buyer of Russian oil amid Western sanctions, according to Reuters. Back to price action, crude oil futures have waned off best levels but WTI still sits north of USD 80/bbl (vs high USD 81.69/bbl) and Brent resides near USD 84.50/bbl (vs high 86.44/bbl). Meanwhile, natural gas prices see a divergence between Dutch TTF and US Henry Hub, with the latter posting intraday losses of some 6.5% with prices closer towards USD 2.05/MMBtu, whilst the former is steady around EUR 48/MWh.


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  Metals trade mostly lower. The rise in oil prices has lifted bond yields and exerted upward pressure on the Dollar, in turn weighing on the metals complex. Spot gold initially tested USD 1,950/oz to the downside before trimming losses to around USD 1,960/oz as the Dollar eases off best levels ahead of a risk-packed week. Base metals are mostly lower as upside is capped by the Buck. 3M LME copper meanwhile trades on either side of USD 9,000/t.

03 Apr 2023 - 09:49- MetalsGeopolitical- Source: Newsquawk