EUROPEAN COMMODITIES UPDATE: Crude rips higher as Novak announces independent Russian oil production cuts

Analysis details (09:45)

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  WTI and Brent front-month futures consolidated overnight before seeing a boost from Russian Deputy PM Novak, who suggested Russia is to voluntarily cut production by 500k BPD in March (oil only), whilst warning the price cap on Russian oil and oil products interfere with market relations, and reiterating Russia will not sell oil to those who adhere to the price cap. Novak added there is a risk that oil price caps will be applied to other global economic sectors, and Russia will take further actions depending on the market situation. The prospect of fewer barrels in the global market bolstered WTI March from around USD 77.60/bbl to levels above USD 80/bbl (vs low 77.47/bbl), whilst Brent April rose from near-USD 84.00/bbl to a high just shy of USD 89/bbl (vs low 83.93/bbl) before trimming gains. As a reminder in late-2022, Novak intimated that Russia could cut oil output by as much as 500-700k BPD in response to the price caps. Reuters sources later suggested that Russia did not consult with OPEC+ on its March oil production cuts, adding it is an “independent decision”, which brings into focus dynamics within OPEC+ and its members. As a reminder, 2020 saw a Russia-Saudi oil price war triggered by a break-up in the dialogue between OPEC and Russia.


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  Nat gas markets are modestly firmer on both sides of the pond, but US Henry Hub and Dutch TTF futures remain within recent ranges. Meanwhile, reports yesterday suggested Germany is close to signing a long-term supply deal of at least 10yrs with Oman for natural gas which would be between 0.5-1mln tons per annum, according to Reuters sources.


• Spot gold is choppy in a tight range on either side of neutral as the DXY is taken on a JPY-induced roller-coaster ride, with the yellow metal oscillating within a USD 20/oz range between USD 1,852-72/oz. Base metals are mostly lower amid the firmer Dollar and cautious risk tone. 3M LME copper moved back under USD 9,000/t. Further on copper, MMG said the Las Bambas copper mine in Peru secured critical supplies that have enabled production to continue at a reduced rate and the property remains secure but transport disruptions continue and critical supplies remain low. It also warned that if the situation of critical supplies persists, it would be forced to commence a period of care and maintenance.

10 Feb 2023 - 09:47- Research Sheet- Source: Newsquawk