EUROPEAN COMMODITIES UPDATE: Industrials hold a mild upward bias following recent hefty losses, while precious metals bide time ahead of NFPs

Analysis details (10:10)

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  WTI Nov and Brent Dec futures are choppy but ultimately modestly firmer intraday after the contracts settled lower by USD 1.91/bbl and USD 1.74/bbl respectively yesterday despite a lack of an obvious catalyst with desks pointing to overarching "demand fears". That being said, analysts at Barclays believe the recent correction in oil prices was too rapid and, in their view, was largely unwarranted, as the desk maintains its Brent fair-value estimate at USD 92/bbl in Q4 2023. Price action this morning has been two-way as the complex consolidates after essentially wiping out its September gains at the start of this month, with WTI back to levels around USD 82.50/bbl (in a USD 82.07-83.12/bbl range) while its Brent counterpart sits near USD 84.50/bbl (in a USD 83.76-84.80/bbl parameter). Over in Russia, the producer has lifted the diesel export ban via pipelines, as touted in Russian press in recent days, while from a geopolitical standpoint, the Russian Parliament speaker said they will consider the matter of cancelling ratification of the nuclear test ban treaty, according to Reuters. Aside from that, there is little to mention on the oil front this morning as all eyes turn to the US jobs report (full preview available in the Newsquawk Research Suite).


• Over to metals, spot gold is flat within recent ranges around USD 1,820/oz (vs yesterday’s 1,813-1,829.22/oz range) as the yellow metal awaits the US labour market report against the backdrop of a highly data-dependent Fed. Base metals rebounded off worst levels at the start of European trading but gains are capped ahead of the tier 1 US data in the afternoon, with 3M LME copper rising to a whisker away from USD 8,000//t before pulling back. Elsewhere, reports this morning suggested the EU and US are said to be seeking an interim steel deal to avoid the return of Trump tariffs, according to Bloomberg – as a reminder, it was reported last week that US President Biden is to host top EU officials for a summit in Washington on October 20th, with steel tariffs among issues to resolve, according to a senior EU official at the time. In terms of bank commentary, Citi expects a further 5-10% downside for base metal prices into year-end, citing micro-headwinds, weak forecasts, and physical balances which offer a less optimistic medium-term picture for nickel, and to a lesser extent for zinc & lead. Their base case remains for copper to trade between USD 7,500-8,500/t over the next 6-9 months, while they see 0-3 month copper downside to USD 7,500/t. The bank expects 0-3 month aluminium prices to grind lower to USD 2,100 in its base case scenario, with China engaging in only limited heavy-lifting, while they expect nickel prices to fall to touch USD 18,000/t by end-2023 and average here through 2024. Citi sees lead prices softening to USD 2,100/t by Q1 2024 before recovering to USD 2,200/t by Q4 2024 once growth sentiment turns, and their base forecast is zinc falling to USD 2,300/t within the next three months and average this level in H1 2024. Finally, the bank says lithium price is forecast to fall a further 15-20% from current levels in the near term.

06 Oct 2023 - 10:12- MetalsGeopolitical- Source: Newsquawk