EUROPEAN COMMODITIES UPDATE: Industrials remain underpinned by China whilst precious metals are hit on JPY-induced Dollar strength

Analysis details (09:45)

• WTI and Brent September futures are firmer in the early European hours of Friday and hold onto the APAC gains which emanated from further Chinese economic support measures. Prices continued to edge higher during the APAC-Europe handover, but have hit some resistance in recent trade in conjunction with Dollar strength, with WTI resides briefly topping USD 76.50/bbl (vs low USD 75.69/bbl) while its Brent counterpart topped USD 80/bbl once again to test USD 80.50/bbl (vs low USD 79.62/bbl) – but still shy of last week’s USD 81.72/bbl peak. Crude-specific newsflow largely came from Russian Deputy PM Novak – the de-facto oil head – who suggested Russia is not ruling out introducing oil export products quotas and added some domestic refineries postponed maintenance to a later date. Aside from that, complex-specific newsflow has been light, whilst one eye remains on geopolitics amid reports Poland is to move military formations from the west to the east of the nation due to possible threats from Russia's Wagner group, according to local press – which follows reports yesterday that Russia’s, Wagner mercenaries began drills in Belarus near the border with Poland.


• On that note, agricultural prices remain in focus as the Russian navy carries out live fire 'exercise' in the Black Sea - Russia's Black Sea Fleet practices firing rockets at surface targets following a warning to Ukraine on ships, according to the Russian Defence Ministry, with the reports adding that warships and planes practised sealing off areas temporarily closed to shipping and seizing ships. As a reminder, earlier this week, the Russian Defence Ministry said it will consider all ships travelling to Ukrainian ports on the Black Sea as potential carriers of military cargoes from 20th July, according to RIA; some areas of the Black Sea have been temporarily declared dangerous for navigation. Adding to the agricultural woes, reports yesterday suggested India – the world’s largest rice exporter - has banned exports of non-basmati white rice. India accounts for around 40% of global exports.


• Over to metals, spot gold is pressured by the Yen-induced Dollar strength and dips from its intraday peak of USD 1,973.40/oz closer to its 100 DMA which resides around USD 1,960.55/oz today. Below that, the area near the psychological USD 1,950/oz could prove to be support as the yellow metal also sees its 50 DMA at USD 1,949.0/oz. Base metals meanwhile are broadly underpinned by the aforementioned Chinese stimulus measures. Markets have also seen updates from a couple of global metals names: Glencore released its HY production report in which it left its production guidance unchanged and suggested its key copper, coal and zinc assets performed in line with expectations and previously communicated guidance. Meanwhile, aluminium said its results were down on lower aluminium and alumina sales prices and demand is slowing in the short term. The firm added that during Q2, European and North American demand for extrusions decreased significantly compared to last year. High-interest rates are continuing to put pressure on demand.

21 Jul 2023 - 09:45- MetalsEU Research- Source: Newsquawk