In this week's Market Movers: Oil market awaits key IEA report; falling Rhine levels cause logistical concerns for commodities; hot weather headache for ethanol markets.
Trade to and from Iran in steel and aluminum products, gold, precious metals, graphite and coal will now be subject to the secondary US sanctions.
How will these sanctions impact commodities markets? Tweet us your thoughts with the hashtag #PlattsMM.
The oil market will be keeping a close eye on Friday's monthly report from the IEA. It comes as higher oil production from Russia and Arab Gulf states offsets output problems elsewhere within OPEC.
Finally, the European petrochemical market is looking with trepidation at falling water levels on the Rhine, a key transport artery in Northwest Europe. Meanwhile, the hot weather is also having a knock-on impact on biofuels, with ethanol looking set to continue its rise on prompt dates, propelled even higher by bullish feedstock prices.
In this week's highlights: the oil market looks out for a key report from the IEA; falling water levels on the Rhine are causing logistical issues for commodities in Northwest Europe ; and the hot weather threatens to cause a headache for ethanol markets.
But first: Effective today, the US is reimposing a raft of sanctions on Iran. It comes after that, in May, the US pulled out of the Iran nuclear deal, formally known as the Joint Comprehensive Plan of Action. The move is set to hit Iran's markets worldwide, with these sanctions impacting metals and minerals trade with the Islamic Republic.
Trade to and from Iran in steel and aluminum products, gold, precious metals, graphite and coal will now be subject to the secondary sanctions. Some EU countries have become increasingly important business partners for Iran since sanctions were lifted in late 2015. This is expected to affect, among others, equipment makers including Italy's Danieli, Germany's SMS and France's Fives, which have invested in major new metals projects in Iran in recent years. That leads us to this week's social media question:
How will US sanctions on Iran impact commodities markets? Tweet us your thoughts with the hashtag #PlattsMM.
And now, oil market participants will be keeping a close eye on Friday's monthly report from the International Energy Agency. It comes as higher oil production from Russia and Arab Gulf states offsets output problems elsewhere within OPEC. Tensions persist, however, over Saudi crude shipments. Shipping through the Strait of Bab al-Mandeb, between the Gulf of Aden and the Red Sea, has been affected following recent attacks on crude carriers.
Meanwhile, the European petrochemical market is looking with trepidation at falling water levels on the Rhine, a key transport artery in Northwest Europe. Logistics costs have been rising as barge loading capacities are being constrained due to the low water levels. Water levels fell to just 75cm last week at the critical Kaub chokepoint in Germany and are expected to keep falling, with the hot weather set to continue. Both barge and lorry markets will be feeling the squeeze as market players look to move their material by any means. The only relief so far has been a drop in demand across many products due to the European summer.
The hot weather is also having a knock-on impact on biofuels. This week, ethanol looks set to continue its rise on prompt dates, propelled even higher by bullish feedstock prices. S&P Global Platts FOB Rotterdam benchmark has seen a significant rise recently, as feedstock prices have increased due to drought conditions across the continent.
Front-month Euronext milling wheat futures hit a 51-month high last Thursday, while Euronext corn futures passed a 60-month high. As a result, ethanol production margins have retreated deeper into negative territory. The market is expecting some more strengthening on the prompt—however a backwardation has emerged in the market, with expectation that sugar-beet based ethanol will drive up stocks further along the curve.
Thanks for kicking off your Monday with us, and have a great week ahead.