Oil Supply Could Far Outstrip Demand Growth if Middle East Peace Deal Holds, IEA Says -- Commodities Roundup

MARKET MOVEMENTS:

--Brent crude oil is up 0.7% to $79.47 a barrel.

--European benchmark gas is down 0.3% at 41.45 euros a megawatt-hour.

--Copper futures are down 0.1% at $13,803 a metric ton.

--Gold futures are down 0.3% to $4,342.10 a troy ounce.

TOP STORY:

Oil Supply Could Far Outstrip Demand Growth if Middle East Peace Deal Holds, IEA Says

The Gulf shock is set to drag oil consumption sharply lower before flows through Hormuz gradually normalize, setting the stage for a supply surge that could far outstrip demand growth if the U.S.-Iran peace deal holds, the International Energy Agency said.

The Paris-based energy watchdog, a group of Western nations and their allies, now expects global oil demand to fall by 1.1 million barrels a day this year-from its previous forecast of a 420,000-barrel-a-day decline-on the back of high prices and severe supply disruptions.

Next year, demand is forecast to rise by 2 million barrels a day, as trade flows normalize, oil prices fall and the economic outlook improves. By contrast, oil supplies are set to surge by around 8 million barrels a day.

OTHER STORIES:

Repsol to Explore Venezuela's Horcon Area for Oil After Signing Agreement With Government

Spain's Repsol said it signed an agreement with the Venezuelan government to explore and potentially develop an oil deposit in the Horcon area, located southeast of Lake Maracaibo.

The memorandum of understanding with the government and state oil company PDVSA expands Repsol's presence in the country after years of turbulence. In April it said it would retake operational control of the Petroquiriquire oil field after the U.S. captured the country's then-President Nicolas Maduro and put pressure on the new administration to rebuild its oil-and-gas industry.

MARKET TALKS:

Gold Little Changed Ahead of Warsh's Speech -- Market Talk

1135 GMT - Gold futures are broadly unchanged ahead of Federal Reserve Chair Kevin Warsh's first public address later on Wednesday. "Traders will be paying close attention to comments from Warsh for guidance on the inflation outlook and clues on how policymakers balance still-elevated price pressures against signs of moderating economic growth and a gradually softening labor market," analysts at Saxo Bank say. New York gold futures slip 0.1% to $4,348.20 a troy ounce in afternoon trading, but remain up 1.5% on the week, supported by a sharp decline in oil prices and easing inflation and rate-hike fears. ([e-mail])

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Oil Could Fall Further on Friday as Oversold Signals Emerge -- Market Talk

1118 GMT - Crude prices might already be in oversold territory and could face further pressure if the U.S. and Iran sign an interim deal to end the war on Friday, Neil Crosby at Sparta Commodities says. "Expect Brent to drop another $5-$10 a barrel," the head of research says. "After the complete washout, it'll be time to track the shipping reality in the Arabian Gulf, and what the other large pieces of the market are doing--demand, U.S. exports, Chinese imports." In afternoon trading, Brent crude is up 0.3% to $79.23 a barrel, while WTI rises 0.5% to $76.44 a barrel. ([e-mail])

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U.A.E. Positioned to Be Major Non-OPEC+ Supplier Next Year -- Market Talk

1027 GMT - The U.A.E. is set to be one of the largest contributors to non-OPEC+ supply growth next year after it quit the cartel, the IEA says. The Paris-based agency forecasts the country's oil production will rise by 730,000 barrels a day, reaching 5.2 million barrels per day. "With its departure from OPEC+ and associated quota limits, output is expected to converge more closely with installed capacity going forward," the IEA said. "The U.A.E.'s deep domestic resources and evolving export capabilities position the country to effectively increase production into 2027 independent of an agreement on opening Hormuz." ([e-mail])

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Oil Demand Recovery to Be Uneven Across Products, IEA Says -- Market Talk

1006 GMT - Any bounce back in global oil demand after the Gulf shock is expected to be uneven across products, the IEA says. LPG, ethane, and jet fuel are likely to experience the strongest rebound, similar to the surge in demand seen after the Covid-19 pandemic. Demand for LPG and ethane will be supported by the replenishment of depleted polymer inventories, the re-entry of Middle Eastern petrochemical producers into global markets, and the competitive advantage of U.S. manufacturers benefiting from lower-cost feedstocks, according to the agency. In contrast, the outlook for gasoil and gasoline remains less certain. The IEA says a full recovery might be constrained by lingering economic effects from disruptions and the increasing availability of alternative technologies in road transport, particularly in China. ([e-mail])

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Gold Should Have Notable Upside -- Market Talk

0856 GMT - Gold prices have significant upside potential, DWS says in a note. The yellow metal has been weak so far this year, with prices well off previous highs and now slightly in negative territory this year, the asset-management firm notes. Expected U.S. rate cuts, a likely weaker dollar and continued strong demand for gold by central banks should support price gains over a 12-month horizon, DWS adds. It sees gold at $5,400 per ounce by June 2027. Spot gold is 0.3% lower at $4,318.51 a troy ounce. ([e-mail])

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Equinor Cuts Lower-Carbon Spending in Strategic Update -- Market Talk

0821 GMT - Norwegian energy major Equinor's spending on lower-carbon projects is set to be lower than envisaged a few years ago, RBC Capital Markets analysts Biraj Borkhataria and Adnan Dhanani write after Tuesday's strategic update. It is shifting its focus toward sustaining fossil fuel production on the Norwegian continental shelf and growing its international upstream portfolio, they add. The company's underlying margins should improve as it produces more barrels internationally, which should support higher free cash flow, they add. The analysts keep their underperform rating on the stock. Shares fall 2.1% to 317 kroner. ([e-mail])

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Gold Unchanged as Traders Await Peace-Deal Signing, Inflation Outlook -- Market Talk

0700 GMT - Gold prices are largely unchanged early Wednesday as traders await the signing of the U.S.-Iran interim peace agreement which should ease the energy and inflation shock triggered by the conflict. Easing inflationary pressures would typically weigh on non-yielding assets like gold but the precious metal is supported by lingering geopolitical uncertainty and cautious investor sentiment, MUFG's Soojin Kim writes. Markets are also waiting for guidance from the U.S. Federal Reserve on the outlook for inflation and interest rates, she adds. New York gold futures trade 0.2% lower at $4,344.70 a troy ounce.([e-mail])

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European Energy Stocks Fall As Oil Continues to Slide Ahead of Sanctions Relief -- Market Talk

0736 GMT - European energy stocks open lower as oil prices continue to slide ahead of the signing of an interim peace agreement between the U.S. and Iran, which is expected to get oil flowing through the Strait of Hormuz. Under the agreement, the U.S. will allow Iran to start selling oil and fuel once the deal to end the conflict is signed on Friday, The Wall Street Journal reported. This pushes Brent down 1.1% to $78.08 a barrel, while WTI falls 0.4% to $75.47 a barrel. In London, BP falls 1.1% and Shell drops 0.9%. France's TotalEnergies is 1.3% lower while Italy's Eni slides 1.6%. Norway's Equinor is down just over 2%. ([e-mail])

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Brent Crude Drops Below $80 a Barrel on Prospects of Sanctions Relief, Hormuz Reopening -- Market Talk

0600 GMT - Brent crude falls below $80 a barrel after reports that the deal between Washington and Tehran includes waivers of sanctions on Iranian oil sales. The U.S. will allow Iran to start selling oil and fuel once the deal to end the conflict is signed on Friday, The Wall Street Journal reported. The MoU also includes lifting U.S. and Iranian blockades in the Strait of Hormuz. In early trading, Brent is down 0.6% to $78.50 a barrel, while WTI falls 0.8% to $75.46 a barrel. Both benchmarks settled more than 5% lower in the previous session--their lowest closes in more than three months. Meanwhile, data provider Kpler said that at least two Iranian-linked supertankers carrying Kharg Island crude appear to have crossed the U.S. naval blockade line, potentially signaling coordinated fleet activity ahead of any formal sanctions or blockade removal. ([e-mail])

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High-Cost Iron-Ore Supply Supporting Prices, For Now -- Market Talk

0500 GMT - Roughly 5% of iron ore supply looks to be losing money at current prices, according to UBS. "This continues to provide a degree of cost-curve support, even as market fundamentals appear softer, including elevated Chinese port inventories," the bank says. Spot iron ore trades at around $102 per ton, effectively in line with the 95th percentile of the industry's cost curve, says UBS. Yet with inventories building, positioning net short and incremental supply rising, UBS sees "downside risk emerging if demand does not recover and marginal tons begin to exit." If iron ore prices fall, the stocks of higher-margin producers including BHP and Rio Tinto would likely fare better than lower-margin operators including Fortescue and Mineral Resources, UBS says. ([e-mail]; @RhiannonHoyle)

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Wildcat Resources a Standout in Market Hungry for Lithium -- Market Talk

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06-17-26 0836ET