EUROPEAN COMMODITIES UPDATE: Crude subdued and base metals falter, but gold remains contained

Analysis details (10:52)

WTI and Brent front-month futures have been trundling lower during the early European session amid several fluid factors for the complex. In terms of where we stand, EU leaders are yet to agree on an oil embargo with the final proposal likely to be a watered-down version of President von der Leyen’s outline from May 4th, with eyes on a potential higher-level meeting as Hungary continues to threaten a veto. Meanwhile, Russian gas transit through Ukraine to Europe is down by almost a third after Kyiv suspended supplies, according to Gazprom – a move that sparked a 12% intraday rise (at the time of writing) in the Dutch TTF June gas contract. Over in China, the COVID situation is seemingly improving amid ongoing curbs as Bejing reports another daily fall in cases, with reports also suggesting that China aims to implement existing policies to support the economy in H1. Nonetheless, the IEA in its monthly oil report downgraded oil demand growth projections for 2022 by 70k BPD, amid China lockdowns and elevated prices, adding that it forecasts a decline of Russian supply by 1.6mln BPD in May, and 2mln BPD in June, which could expand to circa. 3mln BPD from July onwards. IEA added that despite sanctions, total Russian oil exports increase MM in April by 620k BPD; Russia shut in nearly 1mln BPD of oil in April. IEA does not expect an acute supply deficit amid the deteriorating Russian supply situation. Further on the geopolitical front, following Finland’s bid to join NATO, the Russian Kremlin says the Finnish entry into NATO is “definitely” a threat to Russia; at the same time North Korea reportedly fired what could be a ballistic missile, according to the Japanese Coast Guard. Amid the most recent geopolitical headlines, crude futures trimmed losses with WTI June around USD 104/bbl (vs low 102.66/bbl), whilst Brent July resides around 106/bbl (low 104.69/bbl). Elsewhere, spot gold trades on either side of USD 1,850/oz in relatively contained trade. Base metals, on the other hand, have been pressured, with LME copper dipping under USD 9,000/t as traders cite demand woes.

12 May 2022 - 10:52- MetalsGeopolitical- Source: Newsquawk