EUROPEAN COMMODITIES UPDATE: Industrial commodities tilt higher whilst Ags are underpinned by Russia-Ukraine

Analysis details (09:45)

• WTI and Brent September futures are trading horizontally in early European hours following similar side-ways trade seen overnight. Oil prices were choppy and ultimately lower Wednesday, with initial strength unwound into the NY afternoon after bearish EIA inventory data with risk assets also pressured and the Dollar firmer. The selling yesterday accelerated into the futures settlement without an obvious catalyst. Desks note that the strength earlier yesterday was hard to pin on anything specific beyond overarching bullish themes, but some drew attention to China's State Council vowing to increase support for the private economy, albeit the tape was consolidating lower at the time those headlines hit. In the European morning, there isn’t much to add fundamentally, with prices relatively contained to either side of USD 75.50/bbl for WTI and USD 79.50/bbl for Brent, although prices have tilted higher in recent trade as broader market sentiment saw a modest lift. On the geopolitical front, it’s worth being aware that Russia’s Wagner mercenaries are currently holding drills in Belarus in proximity to the border with Poland - Polish Defence Minister said Poland is monitoring the situation on the Belarusian border and is prepared for various scenarios.


• Over to metals, spot gold is flat intraday as it moves in tandem with the Buck as macro newsflow remains somewhat light in Europe this morning – but the yellow metal holds onto most of its post-US CPI spoils as it hovers around levels seen in mid-May. Base metals are mostly firmer and underpinned by reports of further reports of Chinese aid to prop up its ailing property market, with 3M LME copper back above USD 8,500/t as a tilt higher in sentiment in the European morning lifts the red metal further. Elsewhere, mining giants BHP and Anglo American reported their Q2 production numbers whereby both firms upped Y/Y production of iron ore and copper, with BHP also suggesting that the Escondida mine – the highest producing copper mine in the world - is positioned to “increase output further in FY24.”


• Finally, agriculture has been a key theme in recent days after the Black Sea Gain Deal lapsed and Russia opted not to extend the US-brokered agreement. Furthermore, Ukrainian Agriculture Minister Solsky reported that an overnight air strike by Russia on the southern Ukrainian port of Chornomorsk led to extensive damage to grain export facilities and resulted in the loss of 60,000 tons of grain. The destroyed grain was supposed to have been transported 60 days earlier under a wartime agreement that assured safe grain transit via the Black Sea. Ukraine alleges that this air strike, which severely impacted the grain export capacity of the Chornomorsk port, was a calculated move by Russia following its withdrawal from a year-old UN and Turkey-brokered deal. Ukraine's largest producer and exporter of sunflower oil - Kernel - could need 12-months to restore Ukraine's Chornomorsk facilities, according to Bloomberg. CBOT wheat futures are firmer by some 2.5% after rising as much as 9% yesterday.

20 Jul 2023 - 09:49- MetalsEU Research- Source: Newsquawk