EUROPEAN COMMODITIES UPDATE: Crude remains underpinned by bullish fundamentals, gold bides time ahead of FOMC, and base metals fall alongside the Chinese property sector.

Analysis details (09:25)

• WTI October and Brent November futures remain on a positive footing after settling higher by 0.71/bbl and 0.50/bbl respectively yesterday, with fundamentals keeping the complex underpinned. The overarching fundamental factors include the expected end of policy tightening across major G10 central banks (ex-BoJ), better-than-feared economic growth expectations (OECD projections will be released at 10:00BST), the recent raft of Chinese stimulus, and OPEC+ supply reductions – namely by Saudi and Russia. Brent futures climbed above USD 95/bbl overnight - reaching levels last seen in November last year. Desks also flag the forward curve moving deeper into backwardation reflecting concerns over the tightness in the oil market for the remainder of the year, whilst the tightening fundamentals have also led to decent increases in managed money net positions over the most recent reporting week. “Given the constructive fundamentals and more positive sentiment, we could see ICE Brent breaking above USD 100/bbl in the not-too-distant future. However, such a move would likely be unsustainable, leading to growing political pressure, whilst the Saudis and the broader OPEC group will probably not want to push the market too high, given the demand destruction risks this could create”, posit the desk at ING. Sticking with Saudi, the Energy Minister of the Kingdom spoke yesterday and reiterated that they want to be “proactive, pre-emptive and precautious; says we should be able to make decisions in secrecy, like central bankers”, while on the topic of Chinese demand, the energy minister said the situation is "not bad yet... The jury's still out. This is the fundamental issue." Ahead, participants could see some influence on oil prices from the OECD forecasts, whilst other notable scheduled events for the complex include the weekly Private Inventory later today, ahead of the slew of central bank decisions during the rest of the week.


• Over to metals, spot gold is flat as the Dollar remains contained ahead of the FOMC policy decision tomorrow (Full preview available in the Newsquawk Research Suite). In a note yesterday, analysts at Citi pondered the potential impact of the Fed meeting on gold. “We find that on average, gold prices have held steady or rallied following FOMC dates. 3M implied(s) tended to richen while 1M implied(s) cheapened. Lastly, there appears to be a de minimis impact on gold options vol skew… That said, since July 2022, there has been a stronger bias for calls to rally versus puts in the week (T+7) following Fed decisions”, Citi said. The yellow metal trades on either side of its 50 DMA (USD 1,931.54/oz) with the 100 DMA seen to the upside at USD 1,945.30/oz whilst the 200 DMA resides at USD 1,923.40/oz. Base metals meanwhile trade mostly lower amid the downbeat mood seen across the Chinese property sector once again – with 3M copper now under USD 8,300/t in a current near-USD 100/t range between USD 8,273.50/t to USD 8,372.50/t.

19 Sep 2023 - 09:28- Fixed IncomeResearch Sheet- Source: Newsquawk