EUROPEAN COMMODITIES UPDATE: Industrial commodities are pressured by Chinese PMIs while oil traders stay on guard for OPEC+

Analysis details (10:18)

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  WTI and Brent front-month futures are softer intraday amid the broader risk aversion emanating from the Chinese Services PMIs overnight which ultimately further stoked concerns surrounding the economic health and rebound of the second-largest economy – “there was still considerable downward pressure on the economy”, said the Senior Economist at Caixin Insight Group. Meanwhile, as the demand side of the equation is tainted by the Chinese data, participants are awaiting supply-side updates from OPEC+ at some point this week. As a reminder last week, Russia announced that OPEC+ will unveil the “new main parameters” of the supply deal. Desks also expect Saudi to further extend its voluntary 1mln BPD support curb into October, with the Bloomberg poll suggesting 20 out of 25 traders expect an extension of at least one month. Thus far, no announcement or sources have been released. Analysts at ING suggest “Sentiment in the oil market remains constructive. Price direction in the immediate term will be dictated by what Saudi Arabia and Russia decide to do with their supply cuts.” WTI October trades just above USD 85/bbl (in a USD 85.05-86.14/bbl range) while Brent November resides above USD 88/bbl (in a USD 88.06-89.11/bbl range).


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  Dutch TTF kicked off the session firmer by over 3% with news overnight suggesting Offshore Alliance members at Chevron’s Gorgon Facility, Wheatstone Platform and Wheatstone Downstream gas processing facilities in northwest Western Australia have notified the company that they intend to stop work for 2 weeks commencing September 14. Meanwhile, Offshore Alliance members at Chevron’s Wheatstone Downstream facility have made an offer to the company to perform work during the upcoming notified industrial action. Dutch TTF reversed course, possibly amid the broader risk aversion in the market at the time, with the October contract finding resistance at EUR 35/MWh this morning. Meanwhile, Citi raised its Q3 and Q4 forecasts for TTF gas and Asian JKM LNG Prices. The bank expects TTF could average USD 10.4/MMBtu (EUR 33/MWh), while JKM could average USD 12.6/MMBtu. For Q4, Citi expects TTF to average USD 9.2/MMBtu (EUR 29/MWh) and JKM to average USD 12/MMBtu (Prev. forecast 9.1.MMBtu). The bank says hurricanes in the US Gulf pose a key upside risk for JKM and TTF but a downside risk for US Henry Hub.


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  Metals are seeing broader pressure from the firmer Dollar whilst industrial metals see deeper losses vs precious metals amid the demand dent emanating from China. Spot gold is softer but found support near its 50 DMA (1,931.64/oz). Base metals are softer across the board with CME copper lower by over 1% whilst LME copper extends losses under USD 8,500/t. LME nickel bucks the trend but trades relatively flat intraday.

05 Sep 2023 - 10:21- Research Sheet- Source: Newsquawk