EUROPEAN COMMODITIES UPDATE: Industrial commodities and precious metals on the rise in the run-up to US CPI

Analysis details (10:47)

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  WTI and Brent front-month futures have been grinding higher throughout the European morning despite any fresh macro catalysts and as investors look ahead to US CPI. To recap, price action yesterday, WTI and Brent settled lower by USD 2.48/bbl and USD 1.83/bbl respectively as the complex continued to pare its post-Israel spike on Wednesday supply risk concerns faded despite Putin touting extended OPEC action. WTI and Brent futures fell gradually through the session, accelerating in the NY morning on reports in NYT that Iranian leaders were surprised by the Hamas attacks, troughing at USD 83.11/bbl and 85.21/bbl, respectively. “The risk premium continues to erode with the conflict largely contained to Israel and Hamas. Reports that the Iranian government was surprised by the Hamas attack may also ease concern that the US will enforce sanctions against Iran more aggressively, although there have been conflicting reports in recent days regarding Iran's involvement”, say the analysts at ING. Meanwhile, the latest EIA STEO, saw both the 2023 and 2024 world oil demand growth forecasts were cut from last month, while the Private Inventory Data yesterday saw a much larger-than-expected build in crude stocks (+12.9mln vs exp. +0.5mln), while the products were mixed (Gasoline +3.6mln vs exp. -0.8mln; Distillates -3.5mln vs exp. -0.8mln). In terms of today’s session, crude prices found a floor in conjunction with commentary from the Russian and Saudi energy ministers who overall did not add much by way of fresh commentary but reaffirmed that voluntary cuts will last till year-end, while the Saudi oil head suggested “the oil market should not be left alone; we should be proactive given numerous challenges.” Aside from that, the IEA’s Oil Market Report raised its 2023 oil demand forecast to 2.3mln BPD (vs. prev. 2.2mln BPD) and cut the 2024 forecast to 880k BPD (vs. prev. 1mln BPD) amid weaker economic environment and efficiency improvements. Furthermore, the agency suggested OPEC+ voluntary cuts will keep the market in deficit in Q4 but could shift to a surplus if extra cuts are unwound in January, whilst also warning the pullback in oil prices reflects demand destruction. The OPEC Oil Market Report is due at 12:15 BST/07:15 EDT, although no surprises are expected. WTI Nov is back on a USD 84/bbl handle (vs USD 82.78/bbl low) while Brent Dec eyes USD 87/bbl to the upside (vs USD 85.18/bbl low). Sticking with energy, Dutch TTF prices are once again on the grind higher after pulling back yesterday, with the complex still underpinned by Chevron’s Australian LNG situation alongside the suspected sabotage of the Baltic-connector gas pipeline in the run-up to winter heating season – front-month Dutch TTF trades higher by 7.5% at the time of writing at EUR 49.50/MWh.


• Over to metals, spot gold continues grinding higher despite the recovery of the Dollar as geopolitical premium continues to be baked into the yellow metal as the Israeli-Hamas conflict also sees the involvement of Lebanon’s Hezbollah, whilst the US Defence Secretary is in Israel as the Iranian Foreign Minister travels to Lebanon. Aside from geopolitics, gold traders also look ahead to US CPI coupled with several Fed speakers. Spot gold topped its 21 DMA (1,879.70/oz) from a USD 1,873.52/oz low, while spot silver extends gains above USD 22/oz as it approaches its respective 21 DMA (USD 22.33/oz). Base metals are mixed with copper on the rise as participants believe the red metal is still feeling tailwinds from hopes of Chinese stimulus, whilst some also point to potential stockpiling – 3M LME copper trades around the middle of a USD 8,008-8,093/t range after briefly dipping under USD 8,000/t yesterday.

12 Oct 2023 - 10:50- Research Sheet- Source: Newsquawk