EUROPEAN COMMODITIES UPDATE: Crude underpinned by bullish IEA, but base metals bear the brunt of downbeat Chinese data
Analysis details (10:13)
WTI and Brent front-month futures are firmer intraday after settling over a Dollar higher apiece yesterday amid support from the broader risk appetite, Dollar weakness, and Iraq-related supply tailwind. Prices were also underpinned by reports that the US DoE is looking to purchase up to 3mln barrels of sour crude for the SPR. Despite the volumes being somewhat small (vs the 220mln barrels release), ING suggests “the move does show that the US administration is serious about refilling the SPR, something that the market started doubting in recent months.”The complex was heavy overnight as Chinese activity in April was softer than expected and adds to the narrative of a sluggish Chinese reopening. That being said, the complex seemingly found a short-term floor in the early European hours as the Dollar started receding and broader market sentiment climbed off lows, whilst the IEA Oil Market Report offered bullish vibes. To recap, the IEA upped its 2023 global demand growth forecast by 100k BPD from the prior report (vs Unch. in the OPEC MOMR and +120k BPD in the EIA STEO), while it also suggested "The current market pessimism, however, stands in stark contrast to the tighter market balances we anticipate in the second half of the year," and "China’s demand recovery continues to surpass expectations". The IEA report also suggested little impact from the developments regarding the Iraq-Turkey export pipeline since March, the Canadian wildfires, Nigerian protests, and maintenance-related cuts in Brazil - “so far, these outages have neither prompted a spike in prices nor triggered a visible decline in inventories”, IEA said. WTI Jun is back around USD 71.50/bbl (vs low USD 70.88/bbl) while Brent July sits near USD 75.75/bbl (vs low USD 75.02/bbl). Elsewhere, nat gas prices are softer in Europe and in the US, albeit modestly - EU's Sefcovic earlier suggested gas supplies have offered more than 30.4bcm of gas in a joint gas buying scheme, while gas buyers and supplies have been matched to cover 10.9bcm of gas joint buying.
- Over to metals, spot gold holds within recent ranges but saw a modest dip as the DXY strengthened at the time, although the yellow metal is overall uneventful and still contained to Friday’s range. Base metals are more interesting today, with broader weakness emanating from the downbeat Chinese activity data overnight, albeit the complex has clambered off worst levels along with the broader sentiment. 3M LME copper fell to a USD 8,167/t low from a USD 8,300/t intraday peak.
16 May 2023 - 10:15- Research Sheet- Source: Newsquawk
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