Iran casts large shadow on oil market as nuclear deal nears

By the end of this week (Friday 20th March) there is a chance that a deal over Iran’s nuclear development may be agreed with the West. To recap, in mid-2012 sanctions were imposed against Iran’s oil exports, precipitating a drop from 2.5 million barrels per day to close to 1.4 million per day – the lowest since 1986. Any deal may allow the removal of sanctions on Iran’s oil exports, the impact on the oil price however will depend on the detail.

What are the chances of a deal being done? Many commentators have pointed to low oil prices and the impact it has had on the Iranian economy as increasing the likelihood of a deal. To put this in perspective, the 26-year reign of Iran’s Supreme Leader has seen oil prices range from as high as $147 per barrel to as low as $10 per barrel – and there’s never been much of a correlation between oil price and his behaviour. Despite this a confluence of political factors could make a deal more likely now than ever.

read more

Why are aluminium prices falling?

Aluminium for three-month delivery has declined from about $2,100 per tonne in the third quarter of 2014 to below $1,800 per tonne, the lowest since May 2014. The price on the London Metal Exchange (LME) isn’t what an actual buyer would pay though.

A buyer needs to pay a surcharge, or premium to obtain immediate delivery of the metal, one that currently amounts to $370 per tonne. Aluminium premiums are down by around 10-15% with many expecting them to tumble another 40-50% this year.

In February, China exported 420,000 tonnes of unwrought aluminum and aluminum products, more than double the amount exported in February 2014. Exports of aluminium semi-manufactured products is primarily structural in nature, a reflection of the country’s aggressive build-out of its own smelting capacity.

read more

The end of the beginning for commodity price slump?

The US Dollar Index (a measure of the value of the $ against a basket of foreign currencies) hit an 11 year high last week, having seen its biggest 1 year rally since 1985. What are the implications for commodity prices?


Underpinning the surging dollar has been the dramatic shift in the pendulum of market expectations over future policy from the US Federal Reserve. The most recent US employment data exceeded expectations with February being the twelfth straight month payrolls have increased by at least 200,000, the best run since March 1995. The odds of a rate increase in September, implied by futures markets rose from 49% to 60% after the jobs data was published. Remember that the US dollar reflects expectations over future monetary policy in the US and its performance relative to its competitors.

read more