EUROPEAN COMMODITIES UPDATE: Oil and base metals are subdued by sentiment while spot gold holds onto USD 1,900/oz

Analysis details (09:45)

• WTI and Brent March’23 futures are softer intraday with prices meandering around APAC lows. Sentiment for the complex has been hit by yesterday’s US data alongside a surprisingly large build in Private Inventories (headline crude +7.6mln vs exp. -0.6mln). Participants expect a tighter oil market going forward – IEA Chief Birol spoke on the sidelines of the Davos WEF this morning and suggested he does not see tightness in [the oil] market currently but has to be aware of uncertainties, but may see tighter markets in 2023 - more so than some others may think. Birol singled out Russia and China as being the two uncertainties and said If China's economy rebounds this year as expected, will see stronger demand. Birol also suggested that Russian oil exports seem more resilient than initially thought but will fall further in Q1 and beyond. The IEA’s head’s comments follow the IEA Monthly Oil Report released yesterday which underscored the likelihood of a tighter market ahead – with upward revisions made to Chinese oil demand following the nation’s reopening, “and this should leave China making up almost 50% of global demand growth”, according to ING. IEA expects the market to tighten from Q2 2023 with a more pronounced deficit over the second half of the year. WTI resides around USD 79/bbl (USD 78.45-79.48/bbl range) while its Brent counterpart resides around USD 84.00/bbl (83.76-84.55/bbl range). Ahead, the weekly EIA inventory data will be released at 16:00GMT/11:00EDT – delayed on account of the US MLK holiday on Monday.


• Over to metals, spot gold mirrors Dollar action but the yellow metal found some overnight support around the USD 1,900/oz mark but remains off yesterday’s 1,925.79/oz peak. Base metals are lower intraday, in part amid the fallout from the US data yesterday coupled with the soured risk sentiment this morning. In terms of commentary, the LME CEO hit the wires on the sidelines of Davos, and expects sustained upside in prices this year, while he suggested there is untapped demand for trading in Asian hours – this follows sources report from Reuters on January 11th that said that UK FCA is blocking the restart of LME nickel trade during Asian hours, over doubts about the LME's ability to run an orderly market in the time zone. Elsewhere, BHP maintained its FY23 production guidance and maintained unit cost guidance for its Escondida and Western Australia Iron Ore (WAIO). BHP believes China will be a stabilising force when it comes to commodity demand this year, "with OECD nations experiencing economic headwinds. China’s pro-growth policies, including in the property sector, and an easing of COVID-19 restrictions are expected to support progressive improvement from the difficult economic conditions of the first half”, according to BHP. Finally, Citi released some metal forecasts this morning and upgraded its 0-3month copper and aluminium forecasts to USD 10k/T (prev. 7.8k/T) and USD 2.7k/T (prev. 2.35k/T) respectively.

19 Jan 2023 - 09:50- Research Sheet- Source: Newsquawk