EUROPEAN COMMODITIES UPDATE: Crude collapses, gold pressured and copper slips whilst Dollar dominates

Analysis details (10:15)

Crude markets have been selling off since the start of European trade alongside constructive developments on the Iranian Nuclear deal front. The EU put forward a proposal to Tehran in a bid to revive the Iranian nuclear deal, according to a draft cited by Politico. The proposal seemingly sees the US making concessions, primarily by reducing pressure on the Islamic Revolutionary Guard Corps (IRGC), one of Tehran’s demands, whilst blunting some of the effects of Washington’s sanctions on Iran. An Iranian Foreign Ministry spokesperson said significant progress was made in the last round of talks held in Vienna, but consultations over the EU draft are ongoing. The spokesperson added that the ground is prepared for an agreement, provided Iran's red lines are met. Markets are yet to hear formally from the US. Although, US special envoy for the Iran talks, Rob Malley, told Politico that the US is not changing its standards or rules with regards to sanctions enforcement. In terms of extra barrels in the market, in March 2022, the Iranian oil minister said Iranian oil production capacity can reach its maximum less than two months after a nuclear deal is reached. Iran pumped an average of 2.4mln BPD in 2021 and plans to increase output to 3.8mln BPD if sanctions are lifted – Newsquawk analysis available here. WTI Sep’ has gone below USD 90/bbl (vs high 92.10/bbl) whilst Brent Oct’ fell below USD 96/bbl (vs high 98.17/bbl) in today’s session thus far with prices also suppressed by a firmer Dollar. Further on the oil front, profits from Saudi Aramco hit a fresh record, with the State-owned oil group hitting a 90% Y/Y increase in net income in Q2, whilst the CEO said they are working to increase production from multiple energy sources. Saudi Aramco’s CEO also stated that Saudi oil production capacity increase will come gradually with a limited increase in 2024 and in 2025 they should go to 12.3mln BPD. Overnight, data from China was poor in which both Industrial Production and Retail Sales fell short of market expectations. Another factor to keep an eye on is Germany’s Rhine River levels dropped to 32cm at the Kaub point - prior reporting indicated that a move below 40cm made it impossible/uneconomical for some ships to pass, but reports suggested some craft can transit at levels as low as 30cm. Reminder, on Friday, a German official intimated that they did not expect transit to halt. Elsewhere, the firmer Dollar has pushed spot gold back under USD 1,800/oz, with the yellow metal, at the time of writing, around its 50 DMA (1,781/oz) with its 21 DMA (1,755/oz). In terms of base metals, LME copper has been extending on losses back under USD 8,000/t amid the cautious risk tone, firmer Dollar, and dire Chinese data.

15 Aug 2022 - 10:15- MetalsGeopolitical- Source: Newsquawk