EUROPEAN COMMODITIES UPDATE: Crude upside hampered by IEA and China’s lockdown, but metals benefit from a Dollar pullback

Analysis details (10:21)

WTI and Brent front-month futures are firmer intraday after settling lower by around USD 2/bbl yesterday, with the WTI Nov contract just under the USD 88/bbl mark whilst Brent Dec trades back above USD 93/bbl at the time of writing. The European morning saw the release of the IEA Oil Market Outlook, which cut its 2022 and 2023 demand growth outlook forecasts by 60k and 470k BPD respectively. This echoed the sentiment seen in the OPEC MOMR release yesterday which saw its world oil demand growth forecasts for 2022 and 2023 by 500k BPD and 400k BPD respectively, whilst the IEA STEO raised its 2022 forecast modestly by 20kBPD but the 2023 metric was cut by 490k BPD. Going back to the IEA, the agency warned that higher oil prices may prove to be the tipping point for a global economy already on the brink of recession. The IEA also forecasts the real decline in OPEC+ supply to be “around 1 mb/d in OPEC+ crude oil output from November, with the bulk of the cuts delivered by Saudi Arabia and the UAE” amid the group’s compliance issue, whilst “further production losses could come from Russia in December when an EU embargo on crude oil imports and a ban on maritime services go into full effect.” In terms of recent trade, the crude complex fails to garner support from the recent decline in the USD. Meanwhile, a Chinese Health Official suggested China will continue to strengthen COVID prevention and control and will resolutely guard against large-scale outbreaks, whilst China's Anshan City (population 3.3mln) locked down residential compounds amid COVID, according to Bloomberg. Ahead, a delayed release of the weekly DoEs are due. Elsewhere, spot gold gains traction as the Dollar declines ahead of US CPI, with the yellow metal back above its 21 DMA (1,672.50/oz) and eyes its 10 DMA (1,688.86/oz). Base metals are firmer across the board amid the Dollar’s recent decline alongside the gains across stocks, with 3M copper back above USD 7,500/t, whilst LME aluminium outperforms as the metal feels further tailwinds from reports the White House is mulling a ban on Russian aluminium in what was described as a retaliatory move.

13 Oct 2022 - 10:21- Research Sheet- Source: Newsquawk