EUROPEAN COMMODITIES UPDATE: Crude underpinned ahead of JMMC while spot gold remains subdued by the firmer Buck

Analysis details (10:12)

• WTI and Brent futures have been trending higher since after the Chinese equities open overnight, with participants attributing the initial softness in prices to mixed Chinese PMIs, whilst the recovery has been partially pinned on continued Chinese efforts to boost its domestic consumption. Participants will also keep an eye on the OPEC+ JMMC meeting on August 4th, with source reports likely during the week. Delegates so far see no need to change the current pact, according to Energy Intel, while eyes this week are on whether Saudi could extend its voluntary cuts. In terms of commentary, Goldman Sachs released a note yesterday that suggested oil prices have surged 18% since mid-June due to record demand, Saudi supply cuts, and a shift away from growth pessimism - global oil demand reached a new high in July, according to the bank’s estimates. Despite the faster-than-anticipated rally, Goldman Sachs maintained its Brent forecasts of USD 86/bbl for Dec. 2023 and USD 93/bbl for the next 12 months. This is due to an offsetting balance between a stronger demand outlook and the impact of higher realized inventories and sustained high-interest rates. GS revised up its 2023 demand projections by 550k BPD, largely due to robust oil demand and GDP estimates in India and the US. GS says prices are unlikely to drop significantly below the forwards, supporting the case for consumers to buy hedges. WTI September trades around USD 80.70/bbl (vs low 80.13/bbl) while Brent October trades on either side of USD 84.50/bbl (vs low (83.91/bbl).


• Over to metals, spot gold is modestly softer amid the Dollar's strength and ahead of this week’s key risk events including the BoE, US ISM PMIs, and the US Jobs Report. Spot gold sits just above USD 1,950/oz in a ~USD 10/oz intraday range, with its 100 DMA seen at USD 1,967.72 today and the DMA seen at 1,946.02/oz. Base metals are mixed in tandem with the broader mood across the market. 3M LME copper has waned from best levels around USD 8,739/t to levels just under USD 8,700/t with the red metal underpinned by Chinese stimulus hopes. It’s also worth nothing Chinese export controls on key chipmaking material will come into effect on Tuesday 1st August. China controls 60% of global germanium supplies, primarily obtained as a by-product of zinc production (75%) and from coal (25%), according to Reuters, while roughly 80% of gallium production occurs in China, as per the CRMA, and only a limited number of companies, including one in Europe, several in Japan and China, and Canada's Neo Performance Materials, can produce gallium at the needed purity level. Amid China's decision to restrict the export of gallium and germanium, the EU is quickly urging aluminium and zinc companies to explore their production.

31 Jul 2023 - 10:15- MetalsEU Research- Source: Newsquawk