EUROPEAN COMMODITIES UPDATE: Sombre mood across commodities as China’s GDP target underwhelms

Analysis details (09:40)

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  WTI and Brent futures hold onto a downward bias after its largest buyer China underwhelmed markets by announcing a 2023 GDP target of “around 5.0%” against expectations for 5.0-5.5%. Desks have largely downplayed the lower-than-forecast target as February economic data and the abandonment of its zero-COVID policies suggest China could achieve GDP growth of some 6%, but Beijing looks to be conservative – i.e. an “underpromise and overachieve” playbook. Over the weekend, Saudi Arabia raised its Official Selling Prices (OSPs) for most regions and most grades for April loadings, signalling healthy demand, although the price hikes were largely in-fitting with forecasts. “This is the second consecutive month of price increases and reflects optimistic demand sentiment”, says ING. Nonetheless, the demand picture has been hit by China, but prices have largely held onto most of Friday’s gains which saw the WTI Apr and Brent May contracts settle higher by over USD 1/bbl apiece, with the firmer oscillating between around USD 79.25/bbl (vs high 79.92/bbl) and the latter north of USD 85/bbl (vs high 85.83/bbl). Analysts at Goldman Sachs expect Brent to begin grinding higher this month and reach USD 100/bbl in December.


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  Natural gas front-month futures are on the back foot, with US Henry Hub down some 10% at the time of writing whilst Dutch TTF sees losses of over 4% after briefly dipping under EUR 43/MWh. Weekend reports meanwhile suggested exports via a major pipeline, which delivers natural gas to mainland Europe from the UK through Belgium, have been shut until March 8th due to an equipment failure. However, other reports also suggested EU’s gas inventories are fuller-than-normal amid the mostly mild weather in Europe this winter.


• Over to metals, spot gold is flat just above the USD 1,850/oz mark as the yellow metal looks ahead to a risk-packed week including Fed Chair Powell’s speech tomorrow alongside the US jobs report on Friday, and Fed speakers in between. From a technical standpoint, spot gold sees its 50 DMA at USD 1,869.59/oz and its 21 DMA at 1,844.09/oz. Elsewhere, industrial metals remain mostly subdued by the aforementioned demand hit from China’s underwhelming GDP target, with 3M LME copper extending losses under USD 9,000/t – whilst ING analysts posit that “The latest comments from the [Chinese] meeting highlight that ‘the government only aims to support and stabilise the economy, instead of issuing massive stimulus’. The market was expecting some policy support for the slowing construction and industrial sector, which would boost demand for industrial metals.”

06 Mar 2023 - 09:40- Research Sheet- Source: Newsquawk