EUROPEAN COMMODITIES UPDATE: Russia-related commodities soar whilst oil also eyes OPEC+

Analysis details (11:12)

Another day of tremendous gains thus far for the crude complex, with geopolitics still in the forefront and OPEC+ due to commence later today. On the latter, OPEC+ producers are likely to maintain the current policy of 400k BPD monthly hikes, according to sources. However, the upcoming meeting will be more complex than the previous confabs given recent/ongoing major events: Russia’s invasion of Ukraine, progress on the Iranian Nuclear Deal, and Brent sustaining above USD 100/bbls. Looking at where the group stands, OPEC-13 members are in something of a sweet spot with regards to the oil price, not being involved in a war, and as Russian crude looks less attractive. Conversely, the group faces the prospect of Strategic Petroleum Reserve (SPR) releases alongside Iranian oil legally entering the market, which would provide less of an incentive to open the taps beyond the pact. All in all, the path of least resistance is seemingly for OPEC+ to continue with the current hike plan whilst stressing flexibility. In terms of the Russian situation, Russian counter-sanctions are yet to be announced. More recently, the Kremlin has suggested it would not “shoot itself in the foot” when it comes to its sanction response. For context, Russia holds over 30% market share in Europe for both natural gas and oil, alongside a large market share of total exports in nickel (~49%), palladium (~42%), aluminium (~26%), and platinum (~13%), whilst it also exports steel (~7%) and copper (~4%). Amidst all this, there were also source reports that China is reportedly moving to secure commodity supplies rocked by the Ukrainian conflict, according to Bloomberg. Government officials have issued orders to prioritise energy and commodities supply security; pushing state-owned buyers to fill any potential supply gaps for barley, corn, iron ore and oil/gas, but prices were reportedly not mentioned. Russia-related commodities have all been soaring with Brent May hitting a current high of USD 113/bbl (vs low 106.80/bbl) and WTI Apr hitting a peak of USD 111.50/oz (vs low 106.83). CBOT wheat futures hit the limit after rising 7.6%. Nickel, Palladium and Copper are also posting firm gains. Precious metals meanwhile unwound some gains following Kremlin commentary whereby spot gold fell from a 1,948/oz peak to around USD 1,915/oz ahead of yesterday’s low around USD 1,901/oz.

02 Mar 2022 - 11:11- EnergyResearch Sheet- Source: Newsquawk