Crude oil remains under pressure as Iran vows swift ramp-up of output

Tuesday, October 20, 2015

After rallying towards $54/bbl at the start of the month, front month Brent futures swiftly gave back the majority of those gains over the subsequent sessions with activity yesterday reversing Friday’s tentative push back above $50/bbl as contracts ended the session just above $48.50/bbl. Activity this morning has seen this downward pressure persist with prices struggling to hang onto tentative support at the 50 day MA. It seems the risk premium factored in as a result of Russian air strikes in Syria has all but dissipated as investors quickly switched their attention back to the fundamentals as the supply glut continues to dampen the outlook for crude futures.

Iran’s energy minister is adding to this depressed outlook, stating at an industry conference in Tehran that the country would aim to restore its share of global crude exports within months of the sanctions being lifted. Mr Bijan Namdar Zanganeh went further to state explicitly that Iran could increase production by as much as 500,000 bpd immediately after the sanctions are lifted and could reach its pre-sanction output of 3.4m bpd  within as little as seven months. However, analysts are wary of this ambitions target but nonetheless the lacklustre global demand outlook has increased competition for market share among the world’s top oil exporters.

In an encouraging sign of the cautiously optimistic mood spot gold prices headed lower for a third day yesterday as support at the 200 day MA gave way. Selling gathered pace as the yellow metal extended its declines from a multi-month high towards $1,192/oz late last week, closing  0.4% lower yesterday as it targeted $1,170/oz. Investors were encouraged by on the whole better than expected corporate earnings on both sides of the Atlantic, boosting the appetite for risk assets and prompting a modest outflow in the SDPR Gold Trust ETF with total holding pulling back from 700 tonnes on Thursday to 693.75 tonnes on Friday. Chinese retail sales, industrial production and third quarter GDP data released yesterday were on the whole slightly better than expected, shoring up confidence in the Chinese economy after substantial efforts from the government. Investors will be keeping a close eye on next month’s manufacturing PMI and trade balance data for any further indication of stabilising growth.

Brent futures push back below $50/bbl

CO1 Comdty Generic 1St CO Fut 2015 10 20 07 39 14

Spot gold prices drop for a third day as SPDR holdings slip

GDTRGOLD Index SPDR Gold Trust 2015 10 20 07 55 39

Events for today

0700

DE

Sep

PPI

0900

EZ

Aug

Current Account

1330

US

Sep

Housing starts

Topics: Gold, Crude oil, Brent
More from: Kash Kamal