EUROPEAN COMMODITIES UPDATE: Industrial commodities are pressured by disappointing China imports while gold remains underpinned

Analysis details (10:13)

• 
  WTI June and Brent July futures are back on a downward trajectory and reside around USD 72.25/bbl (vs high 73.08/bbl) and USD 76/bbl (vs high USD 76.90/bbl) respectively following some reprieve yesterday which saw both benchmarks settle higher by some USD 1.80/bbl apiece. Price action yesterday was largely driven by supply woes following wildfires in Alberta, Canada - which have resulted in the closure of oil and gas facilities. These fires are impacting a crucial gas production area, with Bloomberg reporting a minimum of 234k BPD of oil and gas output has been halted. “Wildfires in Alberta, Canada, have resulted in the closure of oil and gas facilities. These fires are impacting a crucial gas production area. Bloomberg reports that due to the fires, a minimum of 234Mbbls/d of oil and gas output has been halted.” Add to that, participants are still awaiting the resumption of 450k BPD of Northern Iraqi oil flows via Ceyan in Turkey. On the OPEC+ front, the UAE Energy Minister stated the UAE is not worried about the very short-term and can balance supply and demand, but the country is more worried about long-term investments. The energy minister added that the OPEC+ voluntary cuts were done to balance the market. Over in Saudi Arabia, Aramco posted lower-than-expected net profits but introduced a performance-linked dividend while it believes oil and gas will remain critical components of the energy mix for the foreseeable future. Aramco also said moving forward with the capacity expansion and the long-term outlook remains unchanged. Meanwhile, according to Al Rajhi Bank cited by Energy Intel, the Saudi Government's 2023 budgeted revenues appear to be based on Brent crude oil prices of approximately USD 81/bbl, as indicated by the government budget figures. Finally in the East, Chinese trade data for April showed mixed results, with exports exceeding expectations in both USD and CNY terms, but, imports contracted unexpectedly indicating weaker domestic demand, and overall proving to be a headwind across industrial commodities. Ahead participants will be eyeing the monthly EIA Short-term Energy Outlook (STEO) and the weekly Private Inventories.


• Spot gold remains underpinned around the USD 2,025/oz level by lingering banking sector and US debt ceiling jitters as the yellow metal recovers continues its recovery from the post-NFP drop on Friday, with near-term levels including yesterday’s USD 2,029.40/oz high and the 21 DMA at USD 2,006.96/oz. Regarding the X-date, the US debt limit default is to be between early June and early August, depending on revenue strength, according to the Bipartisan policy centre. As a reminder, US President Biden is to meet with Republican leaders on Tuesday while Congress is far from an agreement (full Newsquawk primer available here). Sticking with gold, according to data via State Administration of Foreign Exchange (SAFE), China's gold reserves increased for the sixth consecutive month in April. Base metals are mostly softer amid the aforementioned Chinese import figures, which also showed Chinese copper imports -12.5% Y/Y in April. 3M LME copper has rebounded from overnight lows however and extends gains above USD 8,500/t.

09 May 2023 - 10:16- Research Sheet- Source: Newsquawk