EUROPEAN COMMODITIES UPDATE: Industrial commodities continue to tumble while gold gave back gains after the initial surge above USD 2,100/oz

Analysis details (10:00)

• Crude futures lose further ground in a continuation of the price action seen since last week’s OPEC+ meeting which ultimately underwhelmed markets as voluntary supply cuts by OPEC+ members have raised doubts about their implementation. Contracts also settled with losses of almost USD 2/bbl on Friday - WTI and Brent trundled to session lows at the settlement, with the futures breaching beneath USD 74.50/bbl and 79.50/bbl, respectively, marking slight losses on the week after the rally earlier in the week faded post-OPEC+. Additionally, the complex saw downside in the wake of the Baker Hughes rig count, whilst the US DoE said oil companies will return 4mln barrels of oil to US SPR by February from the previous exchange, and the US seeks to buy up to 3mln more barrels for SPR for February delivery. Elsewhere, energy-specific newsflow was rather thin on Friday. Prices saw little reaction from a weak ISM Mfg. report, nor from Fed Chair Powell, who ignited a broad dovish market reaction.


• Though, benchmarks have most recently lifted marginally from lows in light newsflow with WTI and Brent Jan/Feb'24 around USD 0.70/bbl above the current USD 72.86/bbl and USD 77.66/bbl troughs.


• Over the weekend, geopolitical headlines have been abundant but have failed to spur much positive action in the energy complex. To recap some of the main headlines: Israel’s military chief said the operation in southern Gaza will match the operation in northern Gaza, Hamas deputy chief said Israeli hostages will not be freed unless there is a ceasefire. Elsewhere, the US Pentagon said it is aware of reports regarding an attack on USS Carney and several commercial vehicles in the Red Sea, while the US said that USS Carney engaged and shot down a drone launched from Houthi-controlled areas in Yemen. It was separately reported that the Yemeni Houthi group said its navy targeted two Israeli ships although Israel’s military said the ships targeted had no connection to the state of Israel, while AFP reported that a UK-owned ship passing through the Red Sea was hit by rocket fire. Meanwhile, the US carried out a self-defence strike in Iraq against an imminent threat at a drone staging site, according to a US military official. In the East, China's military said a US combat ship illegally entered waters adjacent to the Second Thomas Shoal and that the US deliberately disrupted the South China Sea. Over in Latin America, Venezuela on Sunday approved a referendum called by the government of President Maduro to claim sovereignty over an oil- and mineral-rich area of Guyana, according to AP News.


• Spot gold surged at the open to record levels, surpassing USD 2,100/oz before waning back to levels under USD 2,075/oz, with the rally primarily driven by traders betting on the Federal Reserve cutting interest rates early next year. "Technically, momentum is still looking strong after prices broke the resistance of USD 2,050/oz. Investors have been adding fresh long to position both against rising geopolitical tensions and rising prospects of Fed rate cuts," said the desk at ANZ. Net long positions in COMEX gold have also increased, reaching the highest since May 2022, according to CTFC data in the week to November 28th.


• Base metals kicked off the session on a softer footing and declined further as European trade got underway, with the mood weighed on by the broader risk aversion, a firmer Dollar, and losses stemming from China, with 3M LME copper tumbling from a USD 8,614/t high to levels under USD 8,500/t. Desks are keeping an eye on the shutdown of the Cobre Panama mine - which contributes up to 1.5% of global supply. Iron ore futures have traded within a tight range overnight, expectations of falling demand in China, coupled with potential production restrictions, are capping price gains, while robust global demand is providing support. "The iron ore project pipeline has dried up as developers faced the prospect of weak demand from China. This is likely to keep the market tight for the foreseeable future," said ANZ.

04 Dec 2023 - 10:00- Research Sheet- Source: Newsquawk