Oil market braces for more Iranian crude, gold pares losses

Oil falls on Iran deal progress

Crude prices are lower on expectations that Iran is very close to reaching a nuclear deal that will have sanctions lifted.  President Rouhani noted that Iran had reached a broad outline to end oil sanctions but are still discussing final details.  An interim nuclear inspection agreement with the IAEA global nuclear watchdog needs to be extended before the weekend, so a deal could potentially be finalized next week.

Energy markets are widely expecting diplomacy to work and for the Iran nuclear deal to return.

ADNOC CEO Al Jaber also reminded energy markets how strong the crude demand recovery has been so far, with global oil demand returning to 95 million bpd.  The demand side will only look better once Asia gets more vaccines, which should point to a complete recovery in global demand by the end of the year.

WTI crude still seems poised to trade rangebound over the short-term with traders now trying to figure out whether the USD57.50 or USD60 will be the lower boundary.

On the data front, US jobless claims declined for a third consecutive week, which shows the downward trend is firmly intact.  Weekly filings for unemployment fell from a revised higher 478,000 to 444,000, a fresh pandemic-era low.

Gold

Gold is quickly recovering most of its taper concern-driven losses from the FOMC minutes.  Gold is starting to act like its old self.  The bond market is mixed about betting against the Fed’s stubbornness on low rates and that has paved the way for gold to resume a role as an inflation hedge for some traders.

Gold is now getting underlying support from Chinese demand and relief that bullion ETFs are finding their way back into money managers and investor portfolios.  Long-term bullish bets (according to the options market) on gold are becoming a thing again and that should help pave the way for a rally above USD1,900 in the short-term.

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