EUROPEAN COMMODITIES UPDATE: Risk overshadows geopolitical premia for crude as Russia/Ukraine tensions escalate further

Analysis details (10:52)

WTI and Brent are essentially unchanged and well-off highs as some of the geopolitical premia wanes as broader sentiment deteriorates amid the ongoing Russia/Ukraine situation. To recap, the main overnight/weekend developments were a call between President’s Biden & Putin, though the language from this was relatively consistent with the status-quo; more pertinently, US officials highlighted the potential for Russian action to commence as soon as Tuesday. Additionally, Russia reportedly chased away a US submarine in Russian waters; however, the US military dismissed these claims – more recently, a senior Russian military official, via Ifx, warned that they are ready to open fire on foreign ships/submarines that illegal enter their waters. For the session(s) ahead, we look for any fresh guidance via a possible Russian-Ukraine meeting and ultimately for a change in the status-quo. Currently, the benchmarks are near-unchanged but skewed toward the lower end of a range just over USD 2.00/bbl. At the start of the European session, crude was notably supported on geopolitical premia with WTI, for instance, testing USD 95.00/bbl to the upside. However, in the run-up to the European equity cash-open this support dissipated alongside a pull-back in US futures as the geopolitical premia was offset by the broader deterioration in risk sentiment. Geopolitics aside, crude specific commentary has been limited and not sufficient to dictate price action. Technically, Brent held touted support at the UD 93.60/bbl mark (current low 93.69) while any renewed upside faces Fibonacci resistance at USD 97.26/bbl (current high 96.16). Moving to metals, spot gold and silver benefit from haven demand that has spurred the yellow-metal above the USD 1850/oz mark, with technicians noting that we have now eclipsed a weekly downtrend line that has been impacting for some time. For aluminium, Citi has revised up its 2022 view by USD 300/T to USD 3100/T, citing tighter than expected global balances for the 2021-23 period; for reference, base metals are hampered on the general risk tone.

14 Feb 2022 - 10:50- Research Sheet- Source: Newsquawk