EUROPEAN COMMODITIES UPDATE: Crude slips on Shanghai cases; Gold boosted above USD 1,950/oz

Analysis details (11:11)

Crude prices are impacted largely by the worsening COVID situation in Shanghai, and the elevated Buck is only adding to the headwinds. Shanghai city reported another record increase in cases over the weekend, whilst strong restrictions continue to pose downside risks to the oil market, with some desks on the lookout for lower Chinese refinery rates amid weaker domestic demand. On the conflict front, commentary has been punchy from European Foreign Ministers, Russia’s Kremlin, and China’s Foreign Ministry in which China has criticised both NATO and the US. European Foreign Ministers are meeting today with Politico suggesting that one proposal under consideration is some form of tariff on Russian oil, citing diplomats; but sharp divisions remain on the issue. Analysts at ING also suggest “There are also indications that the market is looking less tight. The physical market has seen further weakness recently, whilst the prompt ICE Brent time spread has come under significant pressure in recent weeks”. WTI May remains just under USD 96/bbl (vs high USD 98.52/bbl) whilst Brent June trades around USD 100/bbl (vs high USD 103.30/bbl). In terms of bank action. UBS cut its June oil price forecast and raises its December and March forecasts by USD 10/bbl, all Brent forecasts are now at USD 115/bbl. The Swiss bank expects a wider WTI discount vs Brent, USD 4/bbl (prev. USD 3/bbl), for June and September, to help the US export a part of the oil reserve releases adding that the release of strategic reserves will not fix the oil market's structural imbalance from years of underinvestment. Meanwhile, BofA maintained its 2022-23 Brent average forecast at USD 102/bbl and cut its summer spike prices for Brent to USD 120/bbl. BofA said the oil market is set to remain in turmoil into the summer. Over to metals, spot gold is firmer amid the receding Dollar alongside technicals as the yellow metal topped USD 1,950/oz (vs low 1,939.66/oz). In terms of base metals, desks highlight that metal demand is under pressure from China; “Reports show that some copper and aluminium semi-fabricators have been forced to scale back operations due to raw material shortages and inventory build-ups in final products. It is becoming increasingly hard to move goods freely within the country due to various road blockages or testing requirements for truck drivers. In addition, the demand outlook from downstream sectors remains dampened, especially in the construction sector.”, ING says.

11 Apr 2022 - 11:11- EnergyResearch Sheet- Source: Newsquawk