EUROPEAN COMMODITIES UPDATE: Oil holds a positive bias while metals are flat/mixed in the absence of major catalysts

Analysis details (09:35)

• WTI Jan and Brent Feb futures are modestly firmer intraday after the contracts settled lower by around USD 0.60-0.70/bbl yesterday in choppy trade on Monday, with a softer Dollar offsetting an Israel/Hamas ceasefire extension. The gains in the crude complex today come despite the broader downbeat sentiment across the rest of the market, with participants on standby for OPEC+ sources likely to be released throughout the week until the end of the ministerial confab on Thursday. In terms of the most recent sources, Energy Intel noted there is still no resolution regarding new OPEC+ production baselines and cuts, while it added that the meeting is still scheduled to take place virtually on Thursday, but it understands that a further delay cannot be ruled out. Meanwhile, Reuters sources yesterday suggested OPEC+ is looking at deepening oil production cuts, with a source adding he “expected there to be an option for a 'collective further reduction' on Thursday”. Before that, Bloomberg sources suggested Saudi Arabia is reportedly seeking OPEC+ quota cuts while some members resist, according to a Bloomberg citing delegate, adding that OPEC+ members are yet to clinch an agreement, according to delegates. Analysts at ING suggest “The extension of additional voluntary cuts from Saudi Arabia should erase most of the surplus expected in 1Q24. However, if OPEC+ want to provide more solid support to the market and ensure that we do not see stocks building early next year, they will need to agree on deeper and broader cuts.” That being said, the desk reminds us that OPEC+ tends to surprise markets.


• Geopolitics also remain at the forefront, with the Israel-Hamas truce extended by two days but reports via local press noting of an Israeli shell landing in the West Bank and southern Lebanon. WTI resides around USD 75.25/bbl (in a USD 74.70-75.36/bbl range) while Brent resides around USD 80.25/bbl (in a USD 79.84-80.46/bbl parameter). Dutch TTF is softer intraday with the front-month contract -2% at the time of writing, following on from the weakness yesterday which saw the contract settle with losses of almost 6%. Desks cited the comfortable storage situation heading deeper into winter.


• Spot gold is firmer after the yellow metal reached a six-month high, driven by a weaker USD and lower US Treasury yields. Desks also notes gold demand in Asia, especially in India and China, is affected by higher prices, with dealers offering discounts. From a technical standpoint, spot gold reached a higher of USD 2,018.33/oz yesterday, with the next upside levels including the 15th May high at USD 2,022.11/oz and the 12th May high at USD 2,022.58/oz. Elsewhere, base metals are flat/mixed with price action relatively calm in the absence of major catalysts throughout the European morning. Overnight, Dalian iron ore prices hit one-week lows following reports that the Chinese government would continue to monitor prices and intervene in the market to curb excessive price action. Dalian iron ore fell over 2.5% while Singapore iron ore slipped over 3%. Finally, desks also note that aluminium prices were supported by production curbs in China’s Yunnan province, with output reductions expected to continue into May 2024.

28 Nov 2023 - 09:35- Research Sheet- Source: Newsquawk