EUROPEAN COMMODITY UPDATE: WTI/Brent pressured as a JCPOA agreement is in sight

Analysis details (10:50)

• WTI and Brent are under pressure once more following the EU receives the response from Iran to their draft JCPOA agreement; while reporting on the details is mixed/vague, the general tone from Iran is that a deal is within reach. Note, Iran expects the EU to give their response by the conclusion of Wednesday’s session. Currently, the EU is considering the document and is in discussions with the US on it – reminder, the stance of the US is key to any potential agreement, particularly given earlier reporting that Iran was seeking further concessions on the new exemption period from US sanctions. Note, journalists have highlighted the lack of safeguarding references within the Iranian response; some regarded this as a positive, while others take the stance the stance this may be a negotiating tactic from Iran to get further economic concessions before bringing the safeguarding issues back into focus.


• Currently, benchmarks are lower by circa USD 0.50/bbl, but reside well off session lows that over USD 1/bbl below current parameters; as the benchmarks derive some respite from the overall ‘positive’ Iranian tone from the mentioned caveats/unknowns. Note, today’s parameters are much more contained than Monday’s circa. USD 5.00/bbl range. For the session ahead, Iran aside, impetus will be drawn from the Private Inventory report which is expected to post a headline draw of 0.1mln with a build/draw of over 1mln expected in Distillates and Gasoline respectively.


• Crude aside, Europe energy is in focus as Dutch TTF continue to climb as has surpassed the late-July peak of EUR 230/mWh as Germany’s next-year power trades at the EUR 500/mWH mark for the first occasion, amid a continuation of known factors and as fresh issues, e.g. Rhine level, exacerbates the situation.


• Moving to metals, spot gold is under modest pressure as the USD continues to pick up, a dynamic that was exacerbated by ZEW-driven EUR downside. Though, the yellow metal remains close to the 50-DMA at USD 1779/oz (currently, USD 1775/oz) and as such above the 21-DMA at USD 1758.3/oz.


• Elsewhere, base metals are modestly bid and attempting to recoup from Monday’s data-driven downside, with LME Copper attempting to gain a foothold above the USD 8k mark. While zinc is in focus as Nyrstar Budel, one of the top global zinc smelters, is set to shut down in Europe from September 1st due to elevated energy costs, via Bloomberg.

16 Aug 2022 - 10:50- Research Sheet- Source: Newsquawk