EUROPEAN COMMODITIES UPDATE: Crude underpinned ahead of JMMC while risk aversion lead to a diversion between precious and base metals

Analysis details (09:58)

• WTI and Brent futures are off best levels but remain modestly firmer intraday, with the downside from risk aversion (after US’ rating downgrade by Fitch) cushioned by the mammoth drawdown in Private Inventories yesterday. To recap, private weekly data showed Crude -15.4mln (exp. -1.4mln), Gasoline -1.7mln (exp. -1.3mln), Distillate -0.5mln (exp. +0.1mln), and Cushing -1.8mln – with participants on the lookout for confirmation from today’s DoEs. On the flip side, a US Energy Department spokesperson announced the US pulled its offer to buy 6mln bbls of oil for the SPR due to market conditions, while a Bloomberg reporter noted that the Biden administration delayed the replenishment of the SPR after deciding the offers it received were too expensive. On the OPEC front, Reuters sources suggested OPEC+ is unlikely to tweak its current output policy when it meets on Friday, and the decision to leave policy unchanged stems from the recent increase in oil prices. The OPEC+ JMMC is due on Friday, whereby participants expect the current pact (which does not include the voluntary cuts) to be rolled over, whilst eyes remain on whether Saudi will opt to roll over its 1mln BPD voluntary cuts or unwind offline production by 250-500k BPD. At the time of writing, WTI Sep resides just under USD 82/bbl (in a USD 81.52-82.43/bbl range) while Brent Oct remains above USD 85/bbl (in a USD 85.05-85.99/bbl band).


• Over to metals, the risk-off picture is clear. Spot gold and silver are firmer amid heaven flow and despite the stronger Dollar as the former initially battled overnight resistance at USD 1,950/oz before eventually rising above the level in early European hours. Base metals are softer across the board as risk aversion and the Greenback hit the industrial metals – 3M LME copper declined from a USD 8,669/t high but maintains status above USD 8,500/t.


• Geopolitical concerns continue amid headlines yesterday/overnight that NATO member Poland is sending more troops and combat helicopters to its border with Belarus after reports yesterday, citing witnesses in the Polish village of Bialowieza, suggested that two Belarusian helicopters flew over houses at a low altitude. The Polish military initially denied any border violation, but after further review, they acknowledged that the intrusion did occur, noting that it happened "at a very low height," making it difficult to detect by radar systems. Poland later described the event as a violation of its airspace by Belarus and the Foreign Ministry called on Belarus to immediately explain the incident (Full Newsquawk analysis available here). Meanwhile, there were reports of Russia attacking critical river port facilities and grain silos in the Odessa region which further stoked fears over global food supplies – Chicago wheat prices are firmer by 2.5% at the time of writing whilst Chicago corn sees gains of around 1.5%.

02 Aug 2023 - 10:00- MetalsEU Research- Source: Newsquawk