EUROPEAN COMMODITIES UPDATE: Geopolitical premia unwound as risk-on emerges on Russian troop updates

Analysis details (10:15)

WTI and Brent had a relatively contained start to the European session, in-fitting with the APAC handover after earlier gyrations around a clarification to commentary from Ukraine that the February 16th “attack date” was an ironic reference. Following this, the APAC session was rangebound but with a slight negative bias, as participants awaited fresh geopolitical updates. Shortly after the European cash equity open, Ifx reported that some Western/Southern Russian units have accomplished their missions as drills have now finished and as such will be “head(ing) for their garrisons today”. An update which sparked a broad-based improvement in risk sentiment but served to hamper WTI and Brent, sending them to session lows of USD 92.46/bbl and USD 93.80/bbl respectively, in an unwinding of some geopolitical premia. However, at this point in time it is unclear as to what proportion of Russian troops near Ukraine the “some” refers to regarding the withdrawal, and we are yet to see confirmation of a return-to-base from a non-Russian source. The session ahead has a meeting between German Chancellor Scholz and Russian President Putin (in Russia) scheduled, timing TBC; this gathering will be eyed firstly for any fresh insight into the troop withdrawal and secondly to see if the more conciliatory tone Russian Foreign Minister Lavrov put forward yesterday to Putin, around diplomacy, is echoed. As a reminder, Scholz has come under criticism for taking a soft/weak approach to the geopolitical situation – failing, for instance, to explicitly mention Nord Stream 2 as a potential target for sanctions. On this, EU Foreign Affairs representative Borrell said the pipeline will not be brought into operation in the event of a Russian-Ukraine war. Moving to metals, spot gold was hit on the troop withdrawal reports outlined above as traditional safe havens came under broad based pressure. Specifically, spot gold was pushed back towards the USD 1850/oz mark but is yet to test the figure to the downside. Technically, a move below this would bring the USD 1842.7-1843.8/oz support mark into play. Elsewhere, iron ore has come under noted pressure in APAC trade following concern over the potential for Chinese gov’t action after China warned trading companies active in the metal not to hoard it and/or increase its price. 

15 Feb 2022 - 10:15- MetalsGeopolitical- Source: Newsquawk