From S&P Global Platts, June 21:
The potential imbalance between surging demand for oil as economies recover from the coronavirus pandemic and uncertain supplies from Iran and OPEC tops this week's pick of market trends. Plus, Asian refiners look for cheaper crude, US federal lease sales may resume and Pacific US markets rethink natural gas storage options.
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1. Strong demand supports energy prices as Iran sanctions relief and OPEC uncertainty remains
What's happening? Energy prices continue to rise, particularly now against non-energy commodity indices. Oil has led the rise in the energy complex, but US natural gas has posted gains too. Tightening of oil balances had been expected in the middle of this year and this has now been increasingly reflected in the performance of the energy complex. Since early June, Dated Brent has pushed above $70/b and now extending to about $73/b.
What's next? Markets are focusing on the negotiation of a nuclear deal between world powers and Iran, which briefly resumed after the Iranian presidential election concluded and was then paused again, as well as the upcoming July 1 OPEC+ meeting in which supplies for August and potentially beyond will be set. Demand uplift over the summer months, along with delayed supplies of Iranian barrels, means oil market supply will continue to most likely lag demand, even if OPEC continues to cautiously increase output. This will support continuing stock draws. Against this backdrop has been a noted retrenchment in some non-energy commodities, particularly industrial metals. Until oil supplies catch up with demand normalization, perhaps in the shoulder months of autumn, energy commodity prices should remain supported....
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