EUROPEAN COMMODITIES UPDATE: Crude wanes off best levels but base metals recover on Chinese demand hopes

Analysis details (10:21)

• 
  WTI and Brent August futures have tilted negative in tandem with the broader risk appetite but, in the bigger picture, remain choppy within tight ranges as markets brace for a heavy central bank day as eyes now turn to the BoE, whilst several Fed speakers are also on the docket. Price action was largely horizontal in APAC trade and throughout the early European hours. The delayed Private Invetnory data was mixed and provided little in the way of direction after both August contracts settled higher by over USD 1/bbl apiece - buoyed yesterday by the weaker Dollar in the absence of any oil-specific catalyst. Back to today’s session, the theme is central bank tightening. Commentary-wise, IEA's Birol said the IEA still sees a tight oil market in H2 even with a sluggish China, while IEA also sees very little new LNG coming onto the market this year. Analysts at ING suggest “Stronger buying from Asian refiners more recently has been supportive, whilst Chinese monetary easing earlier in the week has also been helpful.”, however, central bank hawkishness may weigh on the momentum. Elsewhere, UBS said production cuts by OPEC+ member states have dragged OPEC crude exports to a one-year low. exports are likely to fall further in July as a result of the unilateral Saudi production cut. Furthermore, with demand seasonally rising over the coming months, UBS expect larger oil inventory declines to become visible and support oil prices. Ahead, aside from the myriad of central bank updates, markets will be looking for the delayed EIA Weekly Inventory report which will be released at 16:00BST/11:00EDT today due to the Monday US market holiday.


• Over to metals, spot gold is relatively flat under USD 1,930/oz, with the Dollar index also contained, in the run-up to the aforementioned central bank events on the docket – the yellow metal remains within yesterday’s USD 1,919-1,939/oz parameter. Base metals are now mostly firmer (vs mostly softer around the European cash open) despite the subdued risk appetite and relatively flat Dollar, with 3M LME copper extending above USD 8,500/t and briefly topping USD 8,700/t in recent trade – with participants pointing industrial commodities demand being underpinned by the recent Chinese rate cuts.

22 Jun 2023 - 10:23- Fixed IncomeResearch Sheet- Source: Newsquawk