EUROPEAN COMMODITIES UPDATE: OPEC JTC overshadowed by EU sanctions and China woes

Analysis details (10:50)

A morning of gains for the crude complex as the EU unveiled its sixth Russian sanctions package, which will involve a complete import ban on all Russian oil; seaborne, pipeline, crude and refined fuels, with a halt of crude purchases within six months and a halt to refined fuel purchases by year-end. Further, sources suggested Hungary and Slovakia will receive an extended phase-out period which will likely last until the end-2023 under existing contracts, according to sources via Reuters and chiming with reports via Bloomberg and CNBC. Meanwhile, China’s COVID developments continue to raise uncertainties as Beijing indefinitely extended the lockdown measures seen during Labour Holiday, but on the flip side, Global Times reported Shanghai sees a "stable and improving epidemic situation". This all comes ahead of the JMMC and OPEC+ confabs tomorrow whereby the group is expected to maintain its policy in June of upping total group output by around 432k BPD – which, under the terms of the pact, has been marginally increased from 400k BPD as of this May. The meeting comes against the backdrop of several factors, including supply woes from the Russia-Ukraine conflict, dented demand from China’s COVID situation, and underproduction from some OPEC+ nations. A delegate cited by S&P Global recently suggested "We are not currently seeing strong demand and supply tensions that would lead OPEC+ to change its supply policy… we do not have clear visibility on the impact of the confinements in China on oil demand and Russian production.” From a more diplomatic perspective, the elephant in the room will be Russia, but it is in the group’s best interest to maintain a sound relationship with Moscow. Another smooth and drama-free meeting is expected. The findings from the JTC suggested OPEC+ sees production from “non-OPEC participants in OPEC+” at a level 600k BPD lower than the last forecast. WTI June trades around the 106/bbl mark (vs low 102.95/bbl) while Brent July resides around 108.50/bbl (vs low 105.46/bbl). Spot gold is flat intraday and price action is contained to recent ranges around USD 1,862-72/oz as traders keep their powder dry ahead of the FOMC and key data due before including US ADP and ISM Services. Base metals are relatively mixed with LME copper trading on either side of USD 9,500/t.

04 May 2022 - 10:50- MetalsGeopolitical- Source: Newsquawk