EUROPEAN COMMODITIES UPDATE: Industrials take a breather from recent China-induced gains while precious metals benefit from the softer Buck

Analysis details (09:37)

• WTI and Brent futures are subdued intraday after rising to fresh multi-month highs on Tuesday amid further stimulative pledges by China alongside potential supply concerns. During APAC, the complex eased off the prior day’s peaks of USD 79.87/bbl and 83.46/bbl, respectively, after the Private Sector Inventories printed a surprise build (Crude +1.3mln vs exp. -2.0mln), with the internals also bearish ahead of today’s DoE. The subdued prices also come ahead of the FOMC decision which is expected to see a 25bps increase to its rates, and markets will be on the lookout for any signs hinting at whether this will be the final hike or whether there is more in the pipeline. On the OPEC+ front, desks suggest that Saudi Arabia will be content with Brent back above USD 80/bbl, although ING suggested that the decision the kingdom will have to make in the coming weeks is whether the additional 1mln voluntary cuts will be rolled into September, or whether it can be unwound. “The recent price strength might give the Saudis the confidence to start unwinding these cuts, but expectations will have to be managed and they will have to be careful how they go about it – too aggressively and it could put renewed pressure back on the market.”, says the Dutch bank. Crude futures at the time of writing reside near overnight lows, WTI Sep around USD 79.09/bbl (vs high 79.58/bbl) while Brent Oct trades near USD 82.70/bbl (vs high USD 83.21/bbl).


• Over to metals, spot gold is modestly firmer amid the softer Dollar with the yellow metal back above its 100 DMA (USD 1,964.25/oz today) as all eyes turn to the Federal Reserve’s decision and Chair Powell’s press conference (Full Newsquawk preview available in the Research Suite). 


• Elsewhere, base metals are mostly softer and take a breather from the recent China-induced gains, with 3M LME copper just dipping under USD 8,600/t from a recent peak of near USD 8,700/t. Analysts at Goldman Sachs released a note on industrial metals yesterday in which it revised its 3-month and 6-month projections upward, urging investors to seize the price dips. GS upgraded its 3-month copper price target to USD 9,250/t (from USD 7,750/t), its 6-month target to USD 9,500/t (from USD 9,200/t), and maintains its 12-month target of USD 10,000/t. In contrast, the bank forecasts nickel futures to struggle with an anticipated oversupply problem and weak demand, and said nickel's conditions are seen as ripe for short selling. Elsewhere, GS suggests iron ore prices may continue to rise, with significant leverage to China's property sector. Detailed property policy support will be crucial for determining the price path in the second half of the year. Goldman Sachs continues to predict a surplus phase in the iron ore market. If upcoming property policies disappoint, iron ore is likely to come under downside pressure.

26 Jul 2023 - 09:37- MetalsEU Research- Source: Newsquawk