EUROPEAN COMMODITIES UPDATE: Industrial commodities trade mixed whilst precious metals bide time ahead of a risk-packed week

Analysis details (10:35)

• WTI and Brent September futures are flat on the day around USD 77/bbl and USD 81/bbl in what has largely been a sideways session in the grander scheme, with traders on the sidelines for now ahead of a risk-packed week, whereby the Fed and ECB are expected to hike their respective rates by 25bps, whilst the BoJ is expected to stand pat on policy but is seen upping its FY23 CPI forecast upgrade, according to sources via Reuters and Bloomberg. In Europe, the morning saw the release of the Flash PMIs from July – which disappointed across the board – with the underlying themes being the increased risk of recession alongside the dichotomy between manufacturing and services inflation in the Eurozone. 


• Elsewhere, energy and broader industrial commodity traders will also pay particular attention to the Chinese Politburo meeting and will also be eyed for hints of more stimulus measures in the world’s second-largest economy (Newsquawk Primer available here). The initial statement was released from the Politburo in which it vowed to optimise and adjust property policies while nothing of new challenges faced by the domestic economy. Politburo added that will actively expand domestic demand. Desks were keeping an eye on hints for measures to prop up domestic demand. (Highlights via Newsquawk available here). A modest upside was seen across crude futures at the time which rose to session highs. In terms of some forecasts released by Citi, the bank sees some crude upside for the summer, with a 0-3month target of USD 88/bbl and a Q3-2023 average of USD 83/bbl. Further out, the bank sees downside for crude in Q4-2023, with Brent averaging USD 78/bbl and averaging USD 73/bbl in 2024. Sticking with energy, the bank sees TTF prices eventually falling to a range of high USD 3-4/MMBTU as Europe's gas inventory fills at some point in September 2023.


• Over to metals, spot gold trades in tandem with the Dollar and trades on either side of its 100 DMA (USD 1,961.55/oz) with the 50DMA seen at USD 1,947.73/oz today – with traders keeping powder dry ahead of a risk-packed week. Sticking with precious metals and onto silver, Citi targets USD 28-30/oz vs spot USD 25/oz over the next 6-12months. Base metals are mixed with little direction and minimal impetus thus far from the Chinese Politburo statement. Nickel watchers will likely be interested in Russia’s Nornickel decreasing its output Q/Q to 45kt in Q2 vs 47kt in Q1. Analysts at Citi maintained a neutral-to-bearish stance for the next 6-9 months.

24 Jul 2023 - 10:35- MetalsEU Research- Source: Newsquawk