EUROPEAN COMMODITIES UPDATE: Industrials slip on recessionary warnings from the PMIs, while precious metals gain despite the firmer Dollar

Analysis details (10:07)

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  WTI and Brent August futures are once again on a softer footing and extended on the losses seen overnight To recap, prices were subdued during APAC hours amid the downbeat risk tone, and with Mainland Chinese markets away on a domestic holiday. In European trade, the Flash PMIs from France and Germany painted a bleak picture of the health of the Eurozone economy, and suggested: "After Eurozone GDP fell for the second time in a row in the first quarter, the probability has increased somewhat that the GDP change will again carry a negative sign in the current quarter”. Following the release of the regional PMIs, crude futures saw another leg lower to a current session low of USD 68.06/bbl for WTI (vs high USD 69.95/bbl) while its Brent counterpart fell to a trough of USD 72.73/bbl (vs high 74.25/bbl). Aside from that, complex-specific newsflow has been quiet, with the complex continuing to feel the effects of this week’s central bank rate hikes. On the OPEC+ front, Consultant FGE said it "expects Saudi Arabia to keep the extra voluntary cuts in place in August too", rolling them over from July, while others suggest OPEC+ has been rather quiet following the group’s decision at the start of the month. Ahead, aside from the central bank slated for the day, participants may be monitoring the Baker Hughes rig count which has recently been moving the gas markets. Analysts at ING suggest that if the release follows its recent trend, “we can expect a further decline in drilling activity. Higher costs have likely contributed to slower drilling activity. The latest Dallas Fed Energy Survey shows that 60% of producers see drilling and completion costs per well to end this year higher than where they ended 2022.”


• Metals overall are mixed with precious metals firmer and base metals losing ground. Spot gold is drifting higher despite the firmer Dollar, possibly on haven flows after the EZ Flash PMIs flagged another GDP contraction for the quarter. The yellow metal touched an intraday low of around USD 1,970/oz, with the next potential point of support the March 16th low at 1,907.56/oz. Base metals are all pressured by the recessionary warnings emanating from the Flash PMIs earlier in the session, with LME copper falling back under USD 8,500/t from an intraday peak of USD 8,587/t – the future is poised for its first weekly decline in four weeks. It’s also worth noting that Newmont (NEM) declared force majeure on some metal products at the Penasquito mine in Mexico amid strikes – the mine produces gold, silver, lead and zinc.

23 Jun 2023 - 10:10- Research Sheet- Source: Newsquawk