EUROPEAN COMMODITIES UPDATE: Industrials overall subdued while gold trades rangebound pre-FOMC

Analysis details (09:59)

• WTI Jan and Brent Feb futures are softer intraday as futures continued to trundle lower in APAC hours after the contracts settled lower by USD 2.71/bbl and USD 2.79/bbl respectively on Tuesday. Oil prices tumbled to their lowest levels since June on Tuesday despite some rising geopolitical tensions. The downside began late in the European morning and extended all the way into the settlement, seeing WTI and Brent break beneath their Dec 7th lows of USD 68.80/bbl and 73.60/bbl, respectively. There were no major energy-specific updates on Tuesday, although the EIA STEO did cut its 2023 and 2024 world oil demand forecasts slightly, with the OPEC monthly oil market report (MOMR) to be released today (time TBC). There were a few geopolitical updates yesterday, with the Russian Defence Ministry saying a Ukrainian-launched tactical ballistic missile was shot down over the Belgorod region in Russia, in addition to reports of the Yemen Houthis attacking a ship. However, neither appeared to sustain any risk premium pricing in the oil benchmarks. Furthermore, the weekly private inventories showed a larger-than-expected draw (Crude -2.3mln vs exp. -0.7mln), although the products were mixed with Gasoline printing a much larger-than-expected build (+5.8mln vs exp. +1.9mln).


• In terms of European trade, WTI briefly dipped under USD 68.00 to trade in a current range of USD 67.92-68.86/bbl while Brent fell under USD 73/bbl to test USD 72.50/bbl (USD 72.51-73.42/bbl range). Prices remain subdued in the run-up to the FOMC despite further reports on the geopolitical front with the British Maritime Trade Operations reporting two incidents thus far, one near Yemen and one off the coast of Oman – details were light. Elsewhere, 200 nations meeting in Dubai on Wednesday approved the first-ever call for the world to transition away from fossil fuels. In Europe, the River Rhine in south Germany reportedly remains closed to shipping on Wednesday and is expected to remain shut in the coming days amid increased water levels, according to navigation authorities cited by Reuters – the shipping route is used for commodities such as minerals, coal, grains, animal feed alongside oil products such as heating oil. Ahead, participants could see some volatility on the US PPI release ahead of the DoEs and the FOMC announcement and press conference (Full Newsquawk Preview available in the Research Suite), whilst the OPEC MOMR is unlikely to provide impetus amid its backwards-looking nature and with an embargoed copy released to journalists.


• Over to metals, spot gold remains flat ahead of today’s risk events, with the yellow metal contained to a USD 1,972.78-82.59/oz parameter. Downside levels for the metal include the 50 DMA (USD 1,969.48/oz), the 200 DMA (1,952.61/oz) and the 100 DMA (USD 1,940.95/oz), while upside levels include yesterday’s high (1,996.29/oz), then the psychological USD 2,000/oz ahead of the 21 DMA (2,006.22/oz). Spot silver is subdued following seven straight sessions of losses as prices dip further under the USD 23/oz mark and eye support at USD 22.50/oz. Base metals are mostly softer as the Dollar remains firm and risk remains cautious in the run-up to the FOMC decision. Analysts also cite some disappointment from yesterday’s readout from the Chinese Central Economic Work Conference which lacked detail with regards to stimulus. 3M LME copper is back under USD 8,350/t as it eyes USD 8,300/t to the downside whilst iron ore futures overnight retreated some 2% whilst other steelmaking ingredients also weakened.

13 Dec 2023 - 10:08- Research Sheet- Source: Newsquawk