EUROPEAN COMMODITIES UPDATE: Crude pulls back, but gold picks up pace, and base metals trade mixed

Analysis details (10:50)

WTI and Brent July futures felt some mild reprieve overnight after both contracts settled lower by more than USD 2.50/bbl apiece. However, the downside has picked up in recent trade in what is seemingly catch-up to the market's downbeat sentiment as fresh fundamentals remain light during the European morning. That being said, Russian Deputy PM Novak hit the wires earlier and suggested that oil production is to increase in May – although OPEC+ quotas do remain. Meanwhile, Beijing’s COVID situation is seemingly not showing signs of abating. Sticking with China, the port city of Tianjin has also come under COVID pressure – “Further lockdowns in Tianjin is a key risk, given that its port is the largest in Northern China. It is pretty clear that with China’s Covid-zero policy, demand risks will continue to linger”, ING says. Meanwhile, in Europe, member states remain split on the oil embargo aspect of the sixth Russian sanctions package. Recent reports suggested extra cash being syphoned to Hungary to help it drop its veto against oil sanctions. WTI trades back around USD 106.00/bbl and its Brent counterpart around USD 108/bbl. Elsewhere, spot gold trades picked up in recent trade amid potential haven bid alongside a softer Dollar, with the yellow metal around USD 1,825/oz at the time of writing. Meanwhile, base metals are mixed with upside capped by the risk sentiment. “Despite the macro picture remaining dire for metals, some micro developments continue to point to a tight market, especially in the ex-China market”, ING says, “LME aluminium on-warrant stocks set a fresh new low at 206kt as of yesterday, with another 16kt of cancelled warrants signalling the potential for further outflows. However, physical premia have begun to show signs of peaking, and the US mid-west premium has remained below USc40/lb.”. The bank believes that this could be a result of high inflation and uncertainty over the economic outlook, “leaving some consumers on the sidelines.”

19 May 2022 - 10:50- EnergyResearch Sheet- Source: Newsquawk