EUROPEAN COMMODITIES UPDATE: Crude receives a tailwind from Idalia alongside Chinese sources

Analysis details (10:50)

• Despite the pullback in broader sentiment from initial gains around the European open, the crude benchmarks remain bid as Idalia intensifies into a hurricane while Dutch TTF takes a breather from Monday's +10% upside. For metals, spot gold is rangebound above USD 1920/oz as their base counterparts derive support from the APAC handover and reporting since of further Chinese support.


• For crude, WTI and Brent Oct’23 are at the top-end of USD 79.79-80.75/bbl and USD 84.11-85.11/bbl parameters. The respective peaks printed following Bloomberg source reports that Chinese banks are said to be considering additional deposit rate cuts in order to boost growth with regulators said to have signed off on the plan which could be announced as soon as Friday; in terms of the magnitude, reductions of between 5-20bps are touted. Such action follows overnight reports that the PBoC could cut the RRR earlier than expected in order to maintain reasonably ample liquidity, while the lenders reduction would follow similar action in June. China aside, the other bullish catalyst in focus is Hurricane Idalia which is forecast to intensify rapidly into a major hurricane before making landfall in Florida on Wednesday. Currently, the hurricane is just inside the Gulf of Mexico with maximum winds of 75mph.


• Turning to nat gas, Dutch TTF is a touch softer on the session after settling with gains in excess of 10% on Monday after the Offshore Alliance union submitted a notice for strike action at Chevron’s Gorgon and Wheatstone facilities for September 7th. Additionally, the union pledged to escalate action each week until an agreement is reached. Reminder, the filing of a notice to strike does not mean industrial action will occur, as if a deal is attained before the 7th then the union would rescind the notice to strike at the two facilities which, according to ING, account for around 6% of global LNG supply.


• As mentioned, spot gold is in narrow USD 1920.50-1926.69/oz bounds but does retain a very modest positive bias despite the recent Yuan-induced pick up in the USD to a 104.10 high, perhaps given the index remains shy of Monday’s best. For base metals, the complex was already deriving impetus from the firmer APAC handover despite a lack of fresh newsflow and this narrative has extended since the aforementioned Chinese sources.

29 Aug 2023 - 10:48- Research Sheet- Source: Newsquawk