EUROPEAN COMMODITIES UPDATE: Crude trades subdued while gold pulls back from Friday’s best levels

Analysis details (09:49)

• WTI Nov and Brent Dec futures are subdued intraday settling higher by almost USD 5/bbl each on Friday amid the growing Middle Eastern tensions heading into the weekend, which propelled WTI and Brent prices to peaks of USD 87.83/bbl and 90.99/bbl respectively. Weekend geopolitical developments have been plentiful but nothing to majorly shift the narrative yet. Israel has not commenced the widely touted ground operation into Northern Gaza, while Iran offered punchy rhetoric and said it will not remain an observer in this situation and informed Israel via its allies that ‘tomorrow will be too late’ if its crimes in Gaza continue. Iran has reportedly not decided whether to open a new front against Israel, according to an Iranian source close to the government cited by NYT. The crude complex saw some downticks this morning in conjunction with reports that the US, Israel and Egypt agreed to a ceasefire in southern Gaza, although these reports were refuted by the Israeli side who suggested there is no ceasefire in Gaza and the IDF is continuing with attacks. “Uncertainty and concern over the escalation of the Israel-Hamas war continue to support the oil market. In recent days, Iran has warned about the risk of a wider conflict, while there are reports that Saudi Arabia has frozen talks to normalize relations with Israel”, says the analysts at ING. Add to that, the desk says the crude market is also underpinned by reports of the US Treasury imposing sanctions on two firms who are said to have shipped Russian oil above the G7 price cap. “This is the first time we have seen the G-7 price cap enforced, which will raise fears that it will become more difficult to ship Russian oil and tighten the market up further. The US will be careful about enforcing the cap too strongly, particularly given the growing tension in the Middle East”, says the Dutch bank. WTI Nov resides around USD 87.50/bbl (in a USD 87.07-87.98/bbl range) while Brent Dec sits around USD 90.50/bbl (in a USD 90.18-91.20/bbl parameter). Elsewhere, Dutch TTF prices are softer intraday to the tune of around 2.5% at the time of writing, but prices remain above EUR 52/MWh as LNG workers in Australia are poised to resume strike action at Chevron’s Gorgon and Wheatstone facilities on Thursday if negotiations fail.


• Over to metals, spot gold is retracing some of the geopolitical premium baked in on Friday heading into the weekend, which prompted the yellow metal to jump over USD 60/oz on the day. In the absence of any material escalation in geopolitics over the weekend, spot gold has pulled back from a USD 1,932/oz back towards USD 1,915/oz – dipping back under its 100 DMA (1,922.61/oz). “A fall in US treasury yields will have provided some support to the gold market, while the ongoing uncertainty in the Middle East will likely have boosted demand for safe-haven assets”, posits the desk at ING. Base metals are mixed but off best levels amid the broader cautious tone around the market. 3M LME copper briefly rose above USD 8,000/t to a USD 8,022/t peak before reversing back levels closer under the level. Iron ore prices gained overnight with desks pointing to demand from the latest batch of China stimulus – Dalian iron ore ended daytime trading higher by almost 3% whilst Singapore iron posted gains of some 2.5%. Looking ahead, the US and EU are poised to meet on October 20th with the Trump-era steel and aluminium tariffs among the topics of discussion. Furthermore, reports last week suggested the EU is reportedly planning an anti-subsidy probe into Chinese steelmakers at a summit with the US on October 20th, according to FT citing sources. An EU official to Reuters clarified the probe was not limited to China.

16 Oct 2023 - 09:49- Research Sheet- Source: Newsquawk