EUROPEAN COMMODITIES UPDATE: Crude pulls back but metals edge higher whilst the broader mood for the complex remains indecisive

Analysis details (10:05)

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  WTI and Brent July futures are softer intraday just under USD 73.50/bbl and USD 77.50/bbl respectively following the recent sessions of gains, with price action seemingly dictated by the firmer Dollar and downbeat risk tone, whilst data this morning also highlighted that Germany unexpectedly suffered a winter recession. Recent gains in oil prices were (at least partly) fuelled by the Saudi Energy Minister’s warning to speculators of oil ahead of the OPEC+ confab on June 4th. Meanwhile, Russian Deputy PM Novak does not see new steps at the OPEC+ meeting and sees Brent crude above USD 80/bbl by year-end. “There is a large speculative gross short in the market and they will likely be hesitant to carry too much risk into the OPEC+ meeting scheduled for 4 June”, say the analysts at ING. Meanwhile, the week thus far has also seen substantial stock draws in both the Private Inventory and the EIA metrics. 


• Over to gas, the front-month contract for European gas prices continued its downward trend, with a 4.6% drop to below EUR 28/MWh recorded yesterday. ING notes that short-term pressure on prices is expected due to relatively weak demand and the current 66% capacity of EU storage facilities. Consequently, the urgency to replenish storage seen last year isn't as pronounced now. ING only anticipate a significant increase in European gas prices during the winter of 2023/24.


• Moving to metals, spot gold took a hit yesterday amid the firmer Dollar, with added downside seen in early APAC hours which took the yellow metal to a low of around USD 1,955/oz. Prices have been creeping higher as the DXY wanes off the best levels incrementally since. Over to base metals, a mixed picture is seen – in-fitting with the broader market mood. 3M LME copper fell under the USD 8,000/t yesterday and resides under the level this morning, whilst tin prices saw some earlier outperformance as the Wa region in Myanmar reiterated its mining ban.


• Elsewhere in geopolitics, China's Commerce Minister Wang is scheduled to meet with US Commerce Secretary Raimondo, according to Reuters. The news follows reports on Tuesday that US National Security Advisor Sullivan proposed a phone call between Presidents Biden and Xi in June, with hopes for in-person talks in September, SGH Macro said. China's Commerce Minister Wentao is set to hold talks with US Commerce Secretary Raimondo and USTR Tai on May 25-26th. However, the Chinese side has reportedly got only modest expectations for this meeting. Additionally, the US and Chinese Defense Ministers are expected to have discussions from June 2-4th. Beijing sources suggest that the justification for the Xi-Biden meeting is the perceived softer tone of the G7's stance on China compared to initial indications. Sticking with geopolitics, Russian and Belarus Defence Ministers signed a document on the deployment of tactical nuclear weapons in Belarus, via Tass; Russia's Defence Minister Shoigu said the West is waging an undeclared war against Russia and Belarus, according to RIA. Shoigu added that Russia is to control nuclear weapons in Belarus, according to IFX.

25 May 2023 - 10:05- Research Sheet- Source: Newsquawk