EUROPEAN COMMODITIES UPDATE: Crude on a firmer footing while base metals are capped by sub-par Chinese PMIs

WTI/Brent: +0.8%/+0.8%

• Upward bias across crude contracts despite a lack of fresh fundamentals, and a tentative market mood.


• Prices could be supported by a softer Dollar alongside gains in the nat gas markets after the Ukraine/Gazprom transit deal expired without renewal (see below)Energy Inventories - Weekly Private energy inventory data reportedly showed headline crude stocks drawing down by -1.4mln bbls (exp. -2.8mln), gasoline stocks building by +2.2mln bbls (exp. +0.3mln), and distillate inventories building by 5.7mln bbls (exp. -0.1mln); the more widely followed DoE weekly energy inventory report will be published later today.


• WTI Feb resides in a USD 71.79-72.42/bbl intraday range while Brent Mar sits in a USD 74.72-75.33/bbl parameter thus far.

Dutch TTF: U/C

• Russian gas via Ukraine stopped after a 2019 transit agreement expired on January 1st, 2025, with Ukraine refusing to renew the contract due to ongoing hostilities with Russia.


• The cessation of gas flows was expected as Ukraine telegraphed continuously that it would not renew the contract.


• Prices are not expected to be significantly impacted for long as Europe has shifted its reliance on Russian gas to sources from Norway, the US, and Qatar. “The stop of flow via Ukraine on Jan. 1 is the expected situation and the EU is prepared for it,” said the European Commission spokesperson.


• Supply via the route only accounts for around 5% of European demand, with most central European customers managing to source alternative supplies, albeit at a premium.


• Desks believe that while there is no immediate risk of a shortfall in Europe, the challenge will come when stockpiling ahead of the next heating seasons, with the region’s inventories depleting quickly this season – Bloomberg suggests European storage is now less than 75% full.


• Dutch TTF prices gapped higher this morning with the front-month hitting EUR 51/MWh before wiping out gains to sub-EUR 49/MWh (vs EUR 48.889/MWh prior close on Dec 31st).

Spot Gold: +0.5%

• Precious metals in general hold an upward bias as the Dollar kicks the year off on the backfoot. Newsflow for the complex has been light.


• Ahead, some volatility may arise from the US Initial Jobless Claims but focus is on tomorrow's ISM Manufacturing PMI followed by next week's Service PMI, ADP, and NFP, with FOMC minutes also scheduled mid-week.


• Spot gold resides in a USD 2,622-2,639.90/oz range thus far as it reapproaches levels closed to its 50 DMA (2,659.07/oz).

Copper: U/C

• Overall, a mixed and tentative mood in the base metals complex with prices failing to garner much traction from the softer Dollar amid the overhang of downbeat Chinese PMI data.


• To recap, China's manufacturing PMI slowed to 50.5 in December from 51.5 in November, missing expectations. Capital Economics said that while the Caixin manufacturing PMI suggests that factory activity softened in December, wider economic momentum still looks to have improved thanks to faster growth in services and construction, and adds that increased fiscal support should continue to lift growth in the near term given that deficit spending is likely to be front-loaded at the start of 2025. Ahead, Bloomberg writes that investors are anticipating further economic stimulus, especially amid concerns over potential tariffs from President-elect Trump's return to the White House.


• 3M LME copper currently resides in a USD 8,782.50-8,878.50/t range.

02 Jan 2025 - 09:55- ForexData- Source: Newsquawk