Iranian Uncertainties


ICE Brent had another go of trying to break above the US$70/bbl mark, and while the market briefly traded above this level, it failed to settle above and closed more than 1% down on the day. The catalyst for the sell-off was reported that the US and Iran had made progress on nuclear talks, which would bring more crude oil onto the market. However, a Russian representative to the UN has said that more time will be needed in order to reach an agreement. The potential for a further increase in Iranian supply comes at a time when OPEC+ is starting to gradually increase output. We continue to hold the view that the market should be able to absorb both additional Iranian and OPEC+ supply, but clearly, any announcement of a nuclear deal will hit sentiment. We are assuming that the Iranian supply returns to 3MMbbls/d by 4Q21.

Source: iStockphoto

In the US, overnight the API reported that crude oil inventories increased by 620Mbbls over the last reporting week, compared to market expectations for a build of around 2MMbbls. Refined products saw declines, with gasoline and distillate fuel oil inventories falling by 2.84MMbbls and 2.58MMbbls respectively. This data covers the period that the Colonial pipeline was shut, and numbers from the EIA later today will give a better idea of what impact the outage had on regional stocks, and how refiners on the US Gulf Coast reacted to the outage, with the Colonial pipeline a key outlet for a refined product from the region.


Most base metals traded higher yesterday, LME copper at one stage was trading as much as 1.5% higher on the day, hitting an intra-day high of US$10,525/t following concerns over potentially tougher mining rules and higher taxes in Chile, along with the ongoing threat of potential strike action at BHP’s remote operations center in Santiago. Among other metals, zinc prices surged following suggestions of disruptions at Chinese smelters. There are reports that major zinc smelters in Yunnan province were asked to cut power consumption by 10%, which could lead to about 10% of capacity being shut according to Antaike. Yunnan’s monthly refined zinc output is around 75kt, whilst China’s total monthly output is about 600kt.

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Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...

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