EUROPEAN COMMODITIES UPDATE: LME nickel in the limelight but crude remains underpinned

Analysis details (11:05)

All eyes during APAC and early European hours were on the short squeeze in LME Nickel, whereby prices surged over 100% to levels above USD 100k/t (vs around USD 50k/t close) on the back of Ukraine-Russia woes. LME had to suspend trading in Nickel for the remainder of today at a minimum. As a reminder, Russia holds a large market share of total exports in nickel (~49%), palladium (~42%), aluminium (~26%), and platinum (~13%), whilst it also exports steel (~7%) and copper (~4%). A supply disruption will naturally lead to higher prices. However, some desks argue that sanctions would be more detrimental to the global economy given how integrated the above metals are to everyday goods, whilst a rush to stockpiles will further aggravate the ongoing supply chain problems. LME metals have been declining since the exchange suspension, with LME zinc turning negative after rallying some 19% earlier. Precious metals remain bid due to the haven premium coupled with some technical play – with spot silver around USD 26/oz and spot gold holding its head above USD 2,000/oz having seen some overnight resistance at USD 2,020/oz ahead of the 11th August 2020 high at USD 2,030/oz. Turning to crude, WTI and Brent futures remain underpinned around USD 121/bbl and USD 125/bbl respectively by the ongoing Russia-Ukraine woes, whilst some upticks were seen after Shell stated it intends to withdraw from the Russian oil and gas business – further highlighting the shun of Russian oil. Goldman Sachs upped its Brent forecast to USD 135/bbl in 2022 (prev. USD 98/bbl) and USD 115/bbl in 2023 (prev. USD 105/bbl). BofA's baseline for 2022 is for Brent to average USD 110/bbl and Dutch TTF nat gas to average EUR 105/MWh. BofA said if the conflict is resolved, then Brent is seen around USD 95/bbl and Dutch TTF at EUR 75/MWh. If restrictions on Russian commodities lead to major deficits, then Brent is seen around USD 130/bbl and Dutch TTF EUR 200/MWh. Elsewhere, the Iranian President said Tehran will not back down from its red lines regarding the nuclear deal – which presents less of a conciliatory tone. SGH Macro Advisors suggested (in a note dated 7th March) it is their understanding that an Iranian nuclear deal is "now indeed forthcoming". Ahead, the metrics in the EIA STEO will likely be stale, but commentary could be interesting and we also look to multiple officials/executives speaking at CERAWeek.

08 Mar 2022 - 11:04- EnergyResearch Sheet- Source: Newsquawk