EUROPEAN COMMODITIES UPDATE: Crude traders take some chips off the table, gold flatlines pre-FOMC, and base metals climb off worst levels

Analysis details (08:49)

• The crude complex is taking a breather following relatively flat settlements yesterday and after seven consecutive days of gains before that. WTI and Brent November futures are softer intraday with participants potentially taking some chips off the table following the recent crude rally and ahead of a slew of risk events debuted by the FOMC later tonight (full Newsquawk preview available in the Research Suite). Add to that, some pressure may have emanated from the downbeat APAC mood, particularly in Chinese markets, with prices shrugging off the deeper-than-expected draw in private inventories (Crude -5.3mln vs. exp. -2.2mln). Several desks have nudged up forecasts and now see USD 100/bbl Brent in the nearer term – all citing strong fundamentals. ING says “We are likely to see Brent breaking above USD 100/bbl in the near term. However, we don’t think such a move will be sustainable”, while UBS suggests strong fundamentals will support USD 90-100/bbl range for Brent crude in the approaching months. Goldman Sachs upgraded its 12-month ahead Brent forecast to USD 100/bbl (from USD 93/bbl) as it now expects modestly sharper inventory draws. GS now assumes Saudi gradually unwinds its voluntary 1mln BPD cuts starting Q2 2024. Goldman believes "that most of the rally is behind us, and that Brent is unlikely to sustainably exceed USD 105/bbl next year" while adding that OPEC can sustain Brent in USD 80-105/bbl range in 2024 by leveraging robust Asia-centric global demand growth and exercising pricing power assertively. WTI resides around the USD 89.50/bbl mark (vs a 90.85/bbl high) while its Brent counterpart trades under USD 93.50/bbl (vs a 94.54/bbl high).


• Dutch TTF meanwhile is firmer by 5.5% at the time of writing and tested the EUR 39/MWh mark in earlier trade from a low under EUR 37.50/MWh. Newsflow for nat gas has been light this morning but the upside comes in the context of the ongoing Chevron LNG strikes in Australia coupled with source reports yesterday that China’s Sinopec bought over 30 LNG cargoes for winter demand (vs 25 in prelim reports), which in conjunction, could mean increased competition between Europe and Asia for LNG at a time supply is impacted.


• Over to metals, spot gold is trading sideways, with the Dollar index also contained in the run-up to the FOMC announcement and accompanying press conference. The yellow metal remains on either side of its 50 DMA (1,930.97/oz) with downside levels including the 21 DMA (1,924.27/oz) and the 200 DMA (1,923.98/oz), while upside levels include the 100 DMA at USD 1,944.20/oz ahead of the psychological USD 1,950/oz. Meanwhile, Palladium outperforms, possibly on the back of the constructive EU auto registrations (+21% YY in August; battery electric exceeds 20% share for the first time), as the metal is widely used in the automotive industry for catalytic converters and fuel cells in electric vehicles. Base metals meanwhile are more contained but off worst levels as the softer-than-expected inflation prints injected some optimism into the markets.

20 Sep 2023 - 08:50- Research Sheet- Source: Newsquawk