EUROPEAN COMMODITIES UPDATE: Industrial commodities resumes losses as Chinese PMIs hit demand, while precious metals show resilience against the Buck

Analysis details (09:44)

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  WTI July and Brent August futures are once again pressured following a session of hefty losses yesterday, which saw the contracts settle some 4%, or over USD 3/bbl, lower yesterday. Losses in the complex have been attributed to continued growth concerns, with the latest Chinese NBS PMI data painting a weaker-than-expected economic picture of the second-largest oil consumer in the world. To recap, NBS Manufacturing surprisingly fell and non-Manufacturing printed below forecasts - China's NBS said the economic activity level in China declined slightly in May, indicating the need to strengthen the foundation for recovery and development. Furthermore, the complex is pressured by the firmer Dollar as other G10s lose ground – particularly the EUR following the latest batch of French and German State CPIs, which were cooler-than-expected across the board. Add to that, the broader risk aversion across markets exerts some more weight on prices. At the time of writing, WTI tests USD 69/bbl to the downside (vs high 69.69/bbl) while Brent hovers around USD 73.25/bbl (vs high 73.95/bbl).


• The downside across crude prices comes ahead of the OPEC+ meeting slated for June 4th. Analysts are currently grouping around expectations that production will be left unchanged, following recent comments from Russian Deputy PM Novak. However, Standard Chartered believes that the weak macroeconomic environment backs the case for output curbs, while RBC suggests a “lean cut” could be considered. Nonetheless, markets have approached the window in which to expect OPEC+ sources, which will ultimately shape expectations in the run-up to the weekend meeting.


• Elsewhere, spot gold is relatively resilient despite the firm Dollar, potentially on some underlying haven support, with precious metals in general firmer – palladium, platinum, and silver reside in the green. Back to the yellow metal, prices trade just above USD 1,950/oz in a USD 1,953-58/oz range. Base metals are lower across the board as the Chinese PMIs overnight paint a bleak picture for the demand side of the equation. 3M LME copper holds onto USD 8,000/t+ status after falling from a USD 8,125/t overnight peak.

31 May 2023 - 09:46- Research Sheet- Source: Newsquawk