EUROPEAN COMMODITIES UPDATE: Tentative trade across crude futures, but spot gold eyes multi-year lows

Analysis details (10:17)

WTI and Brent front-month futures are choppy after settling higher yesterday, driven by the constructive mood across markets at the time. News flow this morning has been quiet on the oil front in European hours thus far, with the contracts oscillating on either side of USD 88/bbl and USD 94/bbl. Focus turns to the Shanghai Cooperation Organization (SCO) Summit as several “anti-West” leaders convene, including the likes of Russia, Iran, and China. Russian presidential aide Ushakov was asked whether any agreements in the energy sector could be signed with China at this meeting. "I think not”, he said. That being said, Sputnik sources suggested that Russian President Putin and Turkish President Erdogan will be discussing deliveries of Russian gas and partial payments in TRY and RUB. The overarching theme of the summit from a market perspective will likely be the process of replacing the USD for trade settlements. Although the theme itself is not surprising and is more of a longer-term setup, it will likely attract attention. In September, a long-term contract was signed for China National Petroleum Corporation (CNPC) payments to Gazprom to be split into CNY and RUB – a 50/50 ratio. According to SGH Macro, China has pressed Saudi and other Gulf countries to follow similar agreements. Citing sources, SGH Macro says “Beijing would be to start trading crude oil and other commodities with RMB quotas, which would be expanded each year until it became the main settlement currency with Riyadh in bilateral trade” (Full Newsquawk Primer available here). Elsewhere, spot gold meanders just above its YTD low (USD 1,68025/oz) and the 2021 trough at 1,676.10. Base metals are flat/mixed in directionless trade, with 3M LME Copper in a tight range under USD 8,000/t. 

15 Sep 2022 - 10:18- Research Sheet- Source: Newsquawk

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