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The IEA predicts that the gradual recovery of Hormuz will tip into a significant 2027 surplus
The International Energy Agency's monthly report on the oil market said that the world oil market would recover?gradually? from the Strait of Hormuz closure before tipping?into a?significant? surplus in 2027. U.S.-Iran reached an agreement on ending the three-month war. This includes 'Iran reopening Strait of Hormuz, and the U.S. lifting its naval blockade.' This could potentially bring an end to what is the largest oil -supply disruption ever, with Middle East oil production being cut by over 14 million barrels a day, according to IEA. The agency that advises industrialised countries said, "If the deal holds, then exports and production in the Gulf will gradually recover - not to mention the fact that Iranian oil exports could resume fully once the U.S. ban is lifted." In its first look into '2027', the IEA predicted that global oil production would increase by 8 million bpd, while demand would only rise by 2 million bpd. This'may provide a welcomed respite for the market, and an opportunity to replenish depleted inventories or to build new strategic reserve, as countries review their energy policies and strategies in response to crisis.
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Gold stable as US-Iran details emerge; Fed verdict is awaited
On Wednesday, gold prices remained largely unchanged near a week-high as investors awaited the Federal Reserve's first meeting and details of a U.S. Iran agreement. As of 0747 GMT the spot gold price was unchanged at $4,328.67 an ounce after hitting a high of $4.370.82 per ounce on Monday. U.S. Gold futures for August delivery fell 0.1% to $4,348.40. Donald Trump claimed that the agreement with Iran will prevent?Tehran from developing nuclear weapons. A U.S. official stated that Iran will be allowed to export oil. Prices of oil hovered around a three-month high on the expectation of Iranian supplies, which eased inflation concerns. Ilya Spivak is the head of global macro at Tastylive. He said that the rally in gold was losing steam as all eyes were on the Fed's monetary policy announcement (at 1800 GMT). "Traders are still unsure how he will reconcile a hawkish track record with rising inflation and the White House's demand for a dovish turn." The majority of Fed policymakers believe they must keep short-term borrowing rates in the United States on hold for the entire year. Projections due later today are expected to reflect this. A small number have penciled in a rate increase to prevent a spike in inflation. According to CME FedWatch, traders see a 59% likelihood of a U.S. interest rate?hike for December. This is down from 70% the week prior to the announcement of the U.S./Iran peace agreement. When rates are high, gold tends to lose its appeal as it doesn't yield any?interest. In a recent research note, Westpac analysts wrote: "Over the long term, structural support is expected to continue, driven by continued Asian demand, and central?bank purchasing as a hedge for?geopolitical risks and policy risks." Silver spot fell by 0.1%, to $70.12, platinum dropped 1%, to $1,786.25, while palladium was off 0.2%, at $1,348.64. (Reporting and editing by Noel John, Bengaluru. Rashmi aich, Sherry j. Phillips, Eileen Soreng, Harikrishnan Nair.
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European shares flat as investors await US-Iran deal details; BMW slides
European shares opened on Wednesday with a muted tone as investors awaited the details of a pending U.S. Iran peace deal and Federal Reserve's outlook for monetary policy. Auto stocks also fell following BMW's cut to its annual forecast. The pan-European STOXX 600 Index edged up 0.05% to 636.29 by 0710 GMT. BMW dropped 7.3% as the premium 'carmaker' lowered its profit forecast due to the weakness of the Chinese market and the impact of the Iran War. Separately a survey revealed that German automotive suppliers expect business conditions to worsen in the coming year, outnumbering the industry's optimists. This is because domestic hiring has reached a new low, and investments are moving overseas. Investors around the world are on edge as they await the Friday signing of the peace agreement between the U.S.A. and Iran after both countries had signed an initial agreement to end the conflict. Since then, the sharp decline in oil prices has boosted global sentiment. The benchmark 'STOXX600' is trading at an all-time record high. Barclays is the "latest" brokerage to announce it has closed down its underweight position in European stocks. Later in the day, the focus will be on the Fed monetary policy decision. The spotlight will be on Kevin Warsh's comments on interest rate outlook. Leonardo, a stock that is traded by individuals, rose?1.7% following the Italian government's conditional approval of the joint venture between state-controlled defence groups and Turkey's Baykar.
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Middle East crude prices drop as U.S. Iran deal boosts supply outlook
Data showed that the Middle East crude market fell sharply, and even slid into discounts. This was after the United States, Iran, and other countries reached a framework agreement to reopen Strait of Hormuz. The 'Asian refining market led by China is still subdued despite months of?run-cuts.' Hopes for higher supply following the deal have pushed Dubai and Middle East benchmarks to contango, and provided rare arbitrage opportunities in Europe and the United States. Benchmark Dubai’s premium to swaps fell into a 46-cent discount on Tuesday. This is the first contango structure in January. A contango market structure is one in which cargoes that are due to arrive soon trade at a lower price than those that will arrive later, signaling ample supply. On Tuesday, the differentials between?spot Oman and Murban were reduced to 67 cents each. Spot premiums in Dubai and Oman reached record highs, exceeding $60 per barrel. Murban's peak peaked at more than $50 per barrel after the conflict disrupted supply. Naveen Das, senior crude oil analyst at Kpler, said that while the practical timelines of the reopening are still uncertain an estimated 4,000,000 barrels per day?of crude were already moving through the waterway before the diplomatic breakthrough. The reopening of the facility will release millions of barrels that are currently in floating storage. This will directly increase?the physical volume that determines the Dubai benchmark, and apply intense downward pressure to regional pricing. The Strait was responsible for a fifth of the world's crude oil and natural gas. Since April, the Dubai benchmark has been declining as rising crude prices have curtailed buying interest among Asian refiners. This has led to run-cuts and increased purchases of alternative grades in regions such as United States. Some Middle Eastern producers were able to export oil from the Strait of Hormuz ahead of the signing a preliminary deal between the U.S. Abu Dhabi National Oil Company has offered at least 30,000,000 barrels of spot oil to Asian traders and refiners so far this month. ARBITRAGE TO US AND EU OPEN The fall in Middle East crude oil prices has also opened arbitrage opportunities for destinations outside Asia. According to a trader, four or five Very Large Crude Carriers were carrying Murban and Das crude from Abu Dhabi to Europe. The cargoes belonged to Exxon Mobil. According to one trader, Exxon Mobil owns the cargoes. Exxon, TotalEnergies and other oil companies are shipping 13 to 15 million barrels a day of Middle East crude to the U.S. Companies rarely comment on business deals. Traders said that the shipments were more economical for Europe after weak Asian demand, falling Middle East crude prices and lower Middle East premiums reduced the price difference with Atlantic Basin supply. Two traders said that Murban is cheaper than U.S. West Texas Intermediate (WTI) crude for European buyers, as demand in Asia has been weak. Since early June, traders have reported that the arbitrage between U.S. WTI and Asia has closed, which puts pressure on U.S. benchmark grades. WTI Midland, west Texas, traded at a premium on Tuesday compared to the same grade of oil in Houston for the very first time since May as export demand declined on the back of a rapidly closing window. (Reporting from Siyi Liu in Singapore and Florence Tan in Houston, with additional reporting by Georgina McCartney in Houston. Editing by Clarence Fernandez.)
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Gold stable as US-Iran details emerge; Fed verdict is awaited
As details of a U.S. Iran agreement were revealed, and as investors awaited the first Federal Reserve policy meeting by Kevin Warsh, gold prices remained largely stable on Wednesday. As of 0610 GMT spot gold was unchanged at $4,328.48 an ounce after hitting a high of $4370.82 one week earlier. U.S. Gold futures for August delivery fell 0.1% to $4,348.20. Donald Trump claimed that the agreement between Iran and the United States would prevent?Tehran from developing nuclear weapons. A U.S. official stated that Iran would be permitted to sell oil. Prices of oil remained near their lowest level in three months on the expectation that Iranian supplies would be available, which eased inflation concerns. The rally in gold is fading as all eyes are on the Fed's monetary policy announcement (at 1800 GMT), said Ilya?Spivak, Tastylive's head of global macro. "Traders are still unsure how he will reconcile a hawkish track record with rising inflation and the White House's demand for a dovish turn." The majority of Fed policymakers believe they must keep short-term borrowing rates in the United States on hold for the entire year. Projections due later today are expected to reflect this. A small number have penciled in a rate increase to prevent a spike in inflation. According to CME FedWatch, traders see a 59% likelihood of a U.S. interest rate?hike for December. This is down from 70% the week prior to the announcement of the U.S. Iran peace deal. When rates are high, gold tends to lose its appeal as it doesn't yield any?interest. In a recent research note, Westpac analysts wrote: "Over the long term, structural support is expected to continue, driven by continued Asian demand, and central?bank purchasing as a hedge for?geopolitical risks and policy risks." Silver spot rose by 0.2%, to $70.32 an ounce. Platinum fell 0.9%, to $1,787.87. Palladium dropped 0.5%, to $1,344.46. (Reporting and editing by Noel John, Bengaluru. Sherry Jacob Phillips, Eileen Soreng, Harikrishnan Nair, and Rashmi aich)
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Stocks steady, oil continues to fall as traders await Warsh
The news that Iranian fuel could soon be available on global markets prompted a drop in?bond yields on Wednesday. Stocks and currencies also remained quiet ahead of Kevin Warsh’s first Federal Reserve meeting. Brent crude futures are now trading below $80, and have fallen more than a third from their peak after news that the U.S. would lift sanctions against Iranian oil as part of the agreement to end the conflict. Even though the conflict has depleted strategic oil reserves, the prospect of additional supply helped to push yields down on U.S. Treasuries and a rally of global bonds. Luka Belobrajdic is an economist with Westpac. He cautioned that sanctions are unlikely to be lifted immediately and depended on the sustainability of peace. The yields on ten-year Japanese bonds fell by four basis points, to 2.61%. In Australia, the yields on ten-year Australian bonds dropped by almost six bps, to 4.78%. The U.S. and Iran agreement due to be signed this Friday has been confirmed in public only a few times. A three-month blockade of the 'Strait of Hormuz' has pushed U.S. crude oil reserves down to their lowest level since 1983. Wall Street futures in Asia traded slightly higher, while FTSE and European futures declined 0.2%. The chipmaker-heavy'markets' in Tokyo and South Korea brushed off a negative lead overnight from U.S. semiconductor share sales, but a 1.7% drop for Taiwan's TSMC dragged Taiwan benchmark 1% down. MSCI's broadest Asia-Pacific share index outside Japan was largely flat, and in China AI gains were able to offset the sagging consumer stock prices in response to weak retail sales figures. FED ON HOLD WARSH IN FOCUS The dollar has been held in a state of stagnation by traders as they wait to see how Warsh balances his dovish presidency with the markets that?expect an increase this year. The euro is barely moving this week. It's hovering around $1.16. The expected rate increase in Japan on Tuesday failed to lift the yen. However, the downside was protected due to the possibility of an official intervention. It remained at 160.3 per dollar. The Fed Funds rate is unlikely to change, so focus on the press conference and Warsh's voting, as well as the committee members' projections in March, when most of them expected rates to be cut. "We expect Warsh to downplay the forward guidance and instead advocate patience on policy rate and inflation - leaning dovish in relation to market pricing," said Xiao Cui senior economist at Pictet Wealth Management. If Warsh accepts the possibility that rates will rise and doesn't push back against market pricing, it could be interpreted as "hawkish." The Riksbank of Sweden is expected to "stay on hold" but still forecast an increase, whereas the British "inflation rate is projected to accelerate to 3% annually due to higher oil prices. Gold, which is down by more than 20% since January's peaks, bounced from support at $4,000 per ounce to $4,300 on Wednesday. Bitcoin, meanwhile, found support just above $64,000, trading just below $65,900. (Reporting and editing by Jacqueline Wong; Tom Westbrook)
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Gold prices steady as investors wait for details of US-Iran agreement, Fed verdict
The gold price was steady?on a?Wednesday?, near a week-high, as investors awaited more details about the U.S. Iran agreement and the Federal Reserve policy decision following Kevin Warsh’s first meeting as Chairman. As of 0420 GMT, spot gold was unchanged at $4,331.29 an ounce. U.S. Gold Futures for August Delivery was down 0.1% to $4,351.40. Bullion reached a new high of $4.370.82, a more than?one-week old record. A U.S. official said that the deal would allow Iran to begin selling oil after it is signed. President Donald Trump has also stated it will prevent Tehran from acquiring a nuclear bomb. On the back of expectations for Iranian supply, oil prices remained near their lowest level in three months. This eased inflation concerns. Ilya spivak, global macro head at Tastylive, said that the rally (in gold) has lost some of its vigor as attention is now focused on the Fed's monetary policy announcement. Spivak stated that "this marks the first FOMC to be chaired Kevin Warsh, and traders seem uncertain about how he'll reconcile his hawkish record with rising inflation and the pressure from White House to make a pivot towards dovishness." The majority of Fed policymakers believe they must keep the U.S. Projections due later today are expected to show that short-term borrowing rates will remain unchanged for the entire year. A small number of projections pencil in a rate increase to prevent inflation from becoming entrenched. According to CME FedWatch, traders see a 59% probability of a U.S. interest rate increase in December. This is down from 70% the week prior to the announcement of the U.S. Iran peace deal. When rates are high, gold tends to lose its appeal as it doesn't yield any interest. Westpac analysts stated in a research report that "over the longer term structural support for gold is expected to continue, driven by ongoing Asian demand as well as continued central bank purchases, which are used to hedge against geopolitical risks and policy uncertainties." Silver spot fell by 0.2%, to $70.05 an ounce. Platinum lost 0.7%, to $1,792.05, while palladium dropped 0.8%, to $1,341.23. (Reporting and editing by Rashmi aich, Sherry j. Phillips, Eileen Soreng).
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All eyes on the way Warsh walks his line in MORNING BID EUROPE
Tom Westbrook gives us a look at what the future holds for European and global markets. Kevin Warsh wraps up his Federal Open Market Committee (FOMC) meeting, with tumbling oil and a tentative offer of peace as a backdrop that will allow interest rates to be held at the current level. The market will be watching his vote, how he conducts himself at the news conference and his ability to explain the outlook. Warsh does not like "forward guidance" and could choose to avoid a projection of interest rates in the U.S. Central Bank's quarterly economic outlook. He was chosen by Donald Trump, the U.S. president, to lower rates. With inflation over target and employment solid, markets are expecting a rate hike. He will be questioned about it, and the dollar has been dithering in anticipation of his response. Investors might interpret his failure to push back against market pricing as a hawkish message. If he doesn't, investors may worry about inflation. He will also be facing a boardroom in which his predecessor Jerome Powell still has a voice. Shinichi Uchida, the Deputy Governor of the Bank of Japan, may have provided a model of how to maintain a steady hand. He was able to maintain policy flexibility without scaring the markets. Uchida received some extra support from the Japanese?finance minister, who is lurking behind the scenes, threatening to intervene on the currency market if the yen falls again. Asian markets were mostly flat?on Wednesday. Warsh was the star of the show, and oil sellers took a breather to await the confirmed details of the U.S.Iran agreement. Brent futures are now trading below $80 per barrel, following reports that the U.S. is planning to lift sanctions against Iranian oil. Sweden's Riksbank will likely be on hold, but hint at a possible hike later in the year. The British inflation rate is expected to rise to 3% due to the higher oil price, while final European figures are unlikely to differ from preliminary readings. The following are key developments that may influence the markets on Wednesday. - Rate Decisions in the U.S.A. and Sweden British inflation U.S. Retail Sales Data (Editing by Muralikumar Aantharaman).
The Swedish central bank is holding rates and sees an increased possibility of a hike in the near future
As expected, Sweden's central banks kept their policy rate at 1.75 percent on Wednesday. They also said that the chances of interest rates being raised this year have increased compared to March.
The Riksbank stated that underlying inflation is low, and economic activity is weaker than usual. However, supply disruptions caused by the Middle East war have led to an increase in inflationary pressures. This has increased the risks of inflation becoming too high.
The Riksbank stated that "the Executive Board assessed that it was well-balanced for the policy rate to remain at 1.75 percent, but that the likelihood that the rate would be raised later in the?year had increased compared to the March assessment."
In a survey, all 19 analysts except one predicted that rates would remain unchanged. However, the majority of them saw at least a small increase this year or next.
Inflation in Sweden looks hazy. Contrary to other European countries where the Middle East war has already driven up prices, the underlying inflation rate in Sweden in April was zero - the lowest in 30 years.
Temporary tax cuts ahead of the September elections and a stronger crown have lowered import prices.
The headline CPIF measure, which is the preferred Riksbank gauge?that removes the effects of changes in interest rates, was?at 1.5 % in May, well below the 2% target.
Sweden will not be immune from price pressures in the future. In 'April, producer prices rose at the fastest rate since early 2023. Meanwhile, input price inflation was also at a multi-year peak in both manufacturing and services. Reporting by Johan Ahlander in Stockholm, Niklas pollard in Copenhagen, Anna Ringstrom and Louise Rasmussen, with editing by Terje Solsvik.
(source: Reuters)