EUROPEAN COMMODITIES UPDATE: Crude trims more of yesterday’s losses whilst gold feels some Dollar headwinds

Analysis details (10:50)

WTI and Brent March contracts have continued to nurse yesterday’s losses which saw prices rebound in tandem with the revival across US stocks. That being said, the geopolitical landscape remains tense with Russia/Ukraine developing as China and North Korea also making noises – with the latter reportedly firing cruise missiles overnight. Elaborating on the former, desks have been increasingly flagging the serious risk of war between the two sides (although downplayed by Ukraine in early European hours). Rabobank breaks down the different potential sectorial impacts, with energy looking at the Nord Stream 2 pipeline getting caught up in crossfires alongside the threat of sanctions in the form of halts of Russian energy purchases. Russia holds some 30% European oil market share and around 35% NatGas. Rabobank suggests the scenario of war could see “oil hit $125 and natural gas $200 in per barrel of oil equivalent terms”, whilst sanctions could see “oil rising to $175 and European gas to $250” – assume all countries stop purchasing Russian crude, although China could act as a channel for Russian energy into Asia. Aside from geopolitics, COVID has taken a bit more of a backseat in the West vs the East, although daily cases in Japan continue to almost exponentially grow. Elsewhere, it’s worth being aware of a large-scale power blackout that has occurred in central Asia, according to AFP, which could influence short term demand via diesel generators. WTI March is back on a USD 84/bbl handle (vs USD 83.43 intraday low) while its Brent counterpart reclaims USD 87/bbl from a USD 86.50/bbl daily low. Spot gold and silver have been trending lower as the Buck gains further ground, but the yellow metal remains within yesterday’s ranges with the 21DMA to the downside today seen at USD 1,817/oz. In terms of base metals, LME copper is modestly softer amid the indecision across markets, whilst Dalian iron ore futures closed higher with some citing China’s demand heading into the Lunar New Year.

25 Jan 2022 - 10:50- MetalsGeopolitical- Source: Newsquawk