EUROPEAN COMMODITIES UPDATE: Crude off lows, gold sees mild gains, and LME metals relatively mixed

Analysis details (10:37)

WTI and Brent front-month futures are flat intraday but off the worst levels seen overnight after the resumption of trade, with WTI Nov back above USD 89/bbl (vs low 88.27/bbl) and Brent on a USD 94/bbl handle (vs low 93.33/bbl). The initial drift higher from lows coincided with a broader pick-up in sentiment at the time that emanated from the FT article which suggested the Bank of England could extend its temporary bond-buying programme if needed. Prices then continued to drift higher after reports citing the Polish pipeline operator suggested it detected a leak in the Druzhba pipeline, with the cause unknown and the leak was detected in one of two lines, whilst the second line is working as normal. Hungary noted its oil supply is uninterrupted whilst Poland's PKN Orlen said oil supplies via the Druzhba pipeline to the Plock refinery are "uninterrupted", although Germany State of Brandenburg Economy Minister noted that there was a pressure drop in Druzhba's main pipeline No.2. Elsewhere, SGH Macro said the understanding in Beijing is that Saudi Crown Prince MBS assured Russian President Putin that OPEC+ will cooperate to ensure that global crude oil prices do not fall below USD 80/bbl, at least until the end of the military conflict between Russia and Ukraine, even if there is a global economic crisis. On this note, relations between Saudi and the US have unsurprisingly deteriorated following the OPEC+ decision last week, with US President Biden saying the Saudis face consequences after the OPEC+ production cut, according to Bloomberg. It's also worth noting that according to sources cited by the FT, the UAE and Iraq had expressed “misgivings” about production cuts, although when concerns failed to gain traction, the UAE and Iraq agreed to go along with cuts and chose to defend them. Over in Europe, energy ministers are meeting in Prague with a presser currently scheduled at 16:15BST/11:15EDT, according to the schedule -  “It will all be about gas and leave little time for the usual hobnobbing given the gravity of the crisis facing capitals, and the evident cracks between them over the best response.”, according to Politico. Finally, Citi sees Brent averaging USD 101/bbl in 2022 and USD 88/bbl in 2023 and sees WTI averaging USD 96/bbl in 2022 and USD 83/bbl in 2023. Citi noted that the OPEC+ cut would reduce its expected 2mln BPD inventory build to perhaps half of that going forward, but the cut could spark tit-for-tat reactions in Europe and US, with potentially profound consequences. Elsewhere, spot gold is modestly firmer as the upside for the Buck remains capped for now, but the yellow metal remains under its 21DMA (USD 1,673.34/oz). LME metals are mixed with copper relatively flat but aluminium is underperforming following a large build in LME warehouse stocks.

12 Oct 2022 - 10:37- MetalsResearch Sheet- Source: Newsquawk