EUROPEAN COMMODITIES UPDATE: Crude wanes, gold holds onto gains, and base metals see cautious trade

Analysis details (09:46)

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  WTI March and Brent April futures are softer intraday after consolidating with mild gains overnight; follows the benchmarks settling around USD 2.50 lower apiece yesterday. The selling pressure is seemingly a continuation of yesterday’s price action following bearish inventory data, an FOMC rate hike, and a JMMC non-event. Into today’s session, the downticks in the complex are seemingly in tandem with gains in the Dollar, as news flow remains quiet in the run-up to further anticipated rate hikes from the ECB and the BoE. The demand side of the equation remains subdued, with recent commentary from China's Commerce Ministry warning that China's imports and exports face an extremely severe environment of slowing external demand. On the geopolitical front, Russian Foreign Minister Lavrov delivered punchy rhetoric in which he suggested Russia “will ensure that events organised by the West for the anniversary of the special operation in Ukraine [Feb 24th] will not be the only thing to attract world attention”. Over in Europe, the EU has cancelled today’s planned meeting of the EU ambassador as EU states remain divided on a price cap on Russian oil products, according to Politico sources. WTI trades around session lows under USD 76.50/bbl (vs a USD 77.24/bbl high) while its Brent counterpart sits under USD 82.75/bbl (vs a USD 83.61/bbl high).


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  Gas markets in Europe and US once again diverge, albeit modestly. US Henry Hub Nat Gas futures are firmer intraday as prices consolidate from yesterday’s decline, whilst Dutch TTF futures continue to be capped by healthy European gas storage levels coupled with a milder-than-expected winter thus far. Analysts at SEB believe European gas prices have limited scope to fall further as lower prices will spur demand and deter LNG supplies - “Demand reduction and elevated LNG imports are currently overcompensating versus running losses in natural gas supply from Russia”, SEB said. The bank said the gas market will probably see demand rise and LNG imports fall in “not too long” as LNG producers seek higher prices in other markets. Add to that, the Shell CEO sees a tight gas market going into 2023, and suggested "we're not out of the woods".


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  Metals markets are mostly firmer as the complex benefits from the FOMC-induced slide in the Dollar. Spot gold topped the USD 1,950/oz mark and eyes levels seen in April 2020 – with the next upside level the 19th April high at USD 1,981.71/oz, but the yellow metal remains somewhat cautious ahead of the ECB and BoE. Base metals are mostly higher intraday but off best levels as the DXY attempts to recover some recently lost ground, whilst China’s MOFCOM also expressed bearish views concerning external demand. Nonetheless, 3M LME copper reclaimed the USD 9,100/t mark after dipping under the level yesterday. Meanwhile, attention remains on Peru as the Las Bambas mine was shuttered yesterday amid the protests in the area. MMG’s Las Bambas copper mine is one of Peru’s largest copper mines and accounts for around 2% of global supplies.

02 Feb 2023 - 09:50- MetalsEU Research- Source: Newsquawk