EUROPEAN COMMODITIES UPDATE: Crude trims Monday's gains while metals benefit from the Dollar pullback

Analysis details (09:15)

• WTI and Brent January futures are softer, trimming the gains from the prior session in which both contracts settled higher by over USD 1.70/bbl after prices climbed steadily through yesterday’s session, peaking at USD 78.46/bbl and 82.94/bbl, respectively, ahead of settlement. As reported in the FT on Friday, the prospect of an additional 1mln BPD production cut at the approaching OPEC+ meeting on Nov. 26th has been incisive in the benchmarks making a swift recovery from the multi-month lows last Thursday of USD 72.16/bbl and 76.60/bbl for WTI and Brent front-month contracts, respectively.


• Meanwhile, Goldman Sachs' latest note says the desk's statistical model of OPEC decisions suggests that deeper cuts should not be ruled out given the fall in speculative positioning, time spreads, and higher-than-expected inventories. Elsewhere, JPMorgan forecasts stability in oil prices at an average of USD 83/bbl in 2024. This expected stability is attributed to resilient US consumption, strong demand from emerging markets, and steady European markets, despite prevailing economic challenges. A decline to USD 75/bbl is projected for 2025 by the bank, as global oil demand is expected to decelerate due to increased energy efficiencies and the adoption of electric vehicles. The bank warned that global oil demand is expected to slow down due to these factors, and there's a potential for a market surplus driven by non-OPEC+ suppliers like the US unless OPEC continues with production cuts.


• In terms of today’s session, WTI trades around USD 77.50/bbl (in a USD 77.15-77.80/bbl range) and Brent sits around USD 82/bbl (in a USD 81.62-82.25/bbl range). The natural gas market is subdued to the tune of around 1% at the time of writing, with participants citing recent weakness to high inventory levels and warmer than usual US temperatures. Nymex natural gas prices have dropped to a 4-week low on Monday, largely because of these abundant supplies and the reduced demand for heating. US gas inventories are reported to be significantly above their five-year average.


• Over to metals, spot gold prices saw gains overnight, primarily driven by a weakening USD and lower Treasury yields ahead of the FOMC minutes. The yellow metal eclipsed Friday’s USD 1,993.49/oz high to print a peak at USD 1,994.85/oz, with the next upside level seen above USD 2,000/oz while the 21 DMA today sits at USD 1,974.44/oz. Silver prices are firmer today but still within yesterday’s USD 23.2465-8130/oz range. Over to base metals, Copper prices reached a two-month high, influenced by supply concerns in Peru and Panama, alongside a softening US Dollar. 3M LME copper inches closer to USD 8,500/t to the upside with the red metal currently in an intraday range of USD 8,435-8,492.00/t parameter. Iron ore futures have also been on the rise, buoyed by support from China's property sector and concerns over supply disruptions. The most-traded iron ore contract on China's Dalian Commodity Exchange saw a 2.6% increase. The prices of other key steelmaking ingredients, such as coking coal and coke, also saw gains. High steel prices are being sustained due to increased raw material costs and production restrictions in major steel-producing cities like Tangshan, according to desks.


• In the grains market, Chicago soybean futures were firmer overnight, reportedly underpinned by adverse weather conditions in Brazil, traders say, that have impacted crop yields and the political landscape in Argentina following the presidential election. While corn has shown modest gains, wheat prices have declined. The soybean market is particularly sensitive to Brazil's slower planting pace and Argentina's export policies.

21 Nov 2023 - 09:15- Research Sheet- Source: Newsquawk