EUROPEAN COMMODITIES UPDATE: New lows in the Buck further supports crude, precious, and base metal prices

Analysis details (10:49)

WTI and Brent July futures are firmer intraday, with the former around USD 111/bbl (vs low 109.50/bbl) and the latter around USD 113.50 (vs low 111.97/bbl). The complex was supported overnight by the overall risk appetite and losses for the Dollar, with the latter continuing to provide support to commodities. The fundamentals for oil remain fluid as China’s COVID situation is still riddled with uncertainty, although China's NHC Official said the situation overall is showing a steady declining trend. Sticking with China, US President Biden also suggested that the US is mulling reducing Trump-era tariffs on China. In terms of global macro commentary this morning, IMF Managing Director Georgieva said the IMF does not anticipate a global recession, but further downgrades in the growth outlook are not out of the question. “The higher oil prices we are seeing at the moment should help to alleviate the tightness in the market, through demand destruction in the near term and stronger supply growth in the medium to long term.”, analysts at ING say, “However, steps taken by governments - such as cutting fuel taxes and increasing fuel subsidies - make it more challenging for the market to resolve its current tightness,” with the desk also flagging India’s retail tax cuts on gasoline and diesel over the weekend. Over to the supply side, US President Biden repeated his call for OPEC to increase oil production. However, recent reports suggest OPEC’s spare capacity is running out, whilst the FT over the weekend reported that Saudi Arabia signalled it will stand by Russia as a member of OPEC+ amid mounting pressure from sanctions. Elsewhere, Gazprom has shut off gas flows to Finland amid their refusal to pay for the gas either in Rubles or via Gazprombank. Moving to metals, spot gold has coat-tailed on the softer Dollar and the tainted risk mood, with the yellow metal topping its 21 DMA (1,858.63/oz) and inching closer to its 100 DMA (1,886/oz). In terms of base metals, India over the weekend announced export tariff hikes on iron ore and some steel products, whilst import tariffs for raw steel-making materials were cut. “The latest move is part of a series of changes to taxes on crucial commodities aimed at reining in domestic inflation. For iron ore, the tariff for lumps (Fe above 58%) will rise from 30% to 50%, and all fines will be subjected to a 50% tariff. Pellets, which previously were not subject to a tariff, will now see a 45% export tariff imposed. In the case of steel products, up to eight items, including flat-rolled products, will be subjected to a 15% export tariff.” ING details. LME copper, meanwhile, remains firm but back under USD 9,500/t at the time of writing as sentiment turns cautious.

23 May 2022 - 10:48- MetalsResearch Sheet- Source: Newsquawk