EUROPEAN COMMODITIES UPDATE: Industrial commodities slip as EZ PMIs warn of slower global growth, while oil keeps an eye on the OPEC Seminar

Analysis details (09:33)

• WTI and Brent futures show a divergence in intraday price percentage changes as the former did not see a settlement amid the US Independence Day. Prices have been edging lower in recent trade, with Brent September posting losses of almost USD 1/bbl as its slips under USD 75.50/bbl. The most recent leg lower coincided with the UAE stating it will not join the most recent output cuts (by Saudi, Russia, and Algeria) while EZ PMIs flag slower growth and higher interest rates ahead - Italy warned of a recession, France flagged Q2 contractions in the manufacturing and services sectors and German escaped a Q2 recession but sees an increased chance of an H2 recession. 


• Back to OPEC, oil trades’ attention will be fixated on the OPEC International Seminar where energy ministers and oil industry CEOs are set to convene to deliberate on issues such as global energy security, energy transition plans, and the investment challenges facing the industry. This is not a typical decision-making ministerial meeting, although OPEC+ tends to tweak policy whenever they see fit (full Newsquawk Primer available here). 


• In terms of other news, it's also worth flagging again the power outages and affected operations in Kazakhstan that were first reported on Monday, with CPC, which accounts for 1% of global oil deliveries, announcing Tuesday that loading points at Tengiz and Atyrau oil fields are working below full capacity and using reserve power supplies. Reports suggested the blackouts reduced 13% of the nation's oil production on Monday, which equates to around 0.25% of global production. Today, CPC noted the consequences of the power outage in Western Kazakhstan have not been fully removed, and the Tengiz pumping station has been halted.


• Over to metals, spot gold is relatively flat intraday as a firmer Dollar and the broader risk-averse mood keep prices stable in their recent range just under USD 1,925/oz, with participants looking ahead to the FOMC Minutes release later today ahead of Friday’s NFPs. HSBC maintains its 2023 average gold price forecast unchanged at USD 1,905/oz but raises the 2024 forecast to USD 1,850/oz (prev. USD 1,820/oz); sees a 2023 range of USD 1,850-1,970/oz. The bank says the Fed's prolonging tightening cycle is likely to continue to weigh on gold, although the eventual end to the cycle may allow gold to stabilise. HSBC expects real rates to weigh on gold this year and into 2024. Elsewhere, base metals are mostly softer amid the firmer Dollar and sullied sentiment, with 3M LME copper retreating towards USD 8,250/t from a USD 8,377/t intraday peak. Citi research maintains a cautious stance on copper prices through Q1'24, averaging USD 8,000/t over the next three quarters and likely to trade in a USD 7,500-8,500/t range. Citi also says the uncertain China steel outlook for H2'23 is likely to keep iron ore prices under pressure and Citi maintain its 0-3 month price target of USD 100/t. Citi says expectations for policy stimulus could support iron ore in the near term, particularly if potential measures look to tangibly support steel demand.

05 Jul 2023 - 09:33- Research Sheet- Source: Newsquawk