On Monday, Brent opened sharply lower as compared to Friday’s close on news that Iran struck a historic deal with world powers (permanent members of UN Security Council + Germany) regarding its nuclear program. The deal involves suspension of the most disputed parts of the program; Iran committed to stop enriching of uranium and the country should also get rid of stock of uranium enriched to more than 20 percent in exchange for partial alleviation of economic sanctions.
Regarding the direct impact on the oil market, however, the deal “merely” acknowledges and legalizes current volume of Iranian oil exports (about 1 million barrels per day) and therefore has no clear impact on market balance (and therefore on prices, although the volume on exports may slightly increase). In fact, the situation in the North Sea physical oil market has been tightening in the past three weeks which has been confirmed by widening time-spreads.
Concerning the price of the front-month contract on Brent (ICE), although it touched 108 USD per barrel (USD/bbl) level in early morning yesterday, it drifted higher throughout the session and eventually settled barely changed at 111 USD/bbl. At the time of writing of this note, the price is seen at 111.05 USD/bbl
Base Metals
LME aluminium price continued to drift lower on Monday and hit a support at 1775 USD per ton (USD/t) which was the lowest settlement price since early July 2013. Apart from structural oversupply issues, aluminium is the most threatened among base metals by recent change in LME warehousing rules announced by the exchange earlier in November. The rules should increment (despite some degree of uncertainty) aluminium supply in months ahead.