(MENAFN- Khaleej Times)Easing of economic sanctions could lead to a potential crude oversupply.
London: World oil prices sank last week as traders eyed a possible Iran nuclear energy deal that could ease sanctions on the crude producer and potentially add to global oversupply.
In late Thursday afternoon deals Brent crude tumbled more than two dollars as global powers battling to seal a deal with Iran over its nuclear programme called a Press event raising hopes for a breakthrough.
Elsewhere other global commodity markets diverged in a holiday-shortened week with many traders away for an extended Easter holiday break.
Oil
Crude futures fell heavily amid ongoing Iran nuclear talks with the market also weighed down by plentiful petroleum supplies.
“The oil market continues to wait for the outcome of the nuclear negotiations with Iran” said Commerzbank analyst Carsten Fritsch.
“An agreement in the nuclear dispute would doubtless put further pressure on prices in the short term even though sanctions will probably be eased only gradually.”
Weary negotiators in the Swiss city of Lausanne hoped on Thursday to see the light at the end of the tunnel after talking until dawn but midway through an eighth day were still haggling over the outlines of a deal curtailing Iran’s nuclear programme.
US Secretary of State John Kerry and Iranian counterpart Mohammad Javad Zarif talked through the night going line by line over their differences in a bid to agree a framework for an accord to cut back Iran’s nuclear ambitions diplomats close to the talks said.
They made “significant progress” but there is no “final result yet” Zarif told reporters early on Thursday at the Swiss hotel hosting the negotiations saying he felt “lucky” to have slept for two hours.
Russian Foreign Minister Sergei Lavrov said on Thursday that global powers and Iran were “only steps” from a negotiated deal aimed at cutting back Tehran’s nuclear programme.
After 18 months of intense negotiations the six world powers and Iran are hoping to agree a deal that puts a lid on 12 years of dangerously rising tensions.
The aim is to turn the framework they want to leave Lausanne with into a comprehensive accord backed by specific technical commitments by June 30 when an interim deal struck in November 2013 expires.
With the world’s fourth biggest oil and second biggest gas reserves the energy industry is the cornerstone of Iran’s economy but it has been hit hard by the American and European embargo imposed since 2012.
The P5+1 — comprising Britain China France Russia and the United States plus Germany — are seeking to hammer out a deal which they hope will put an atomic bomb out of Tehran’s reach.
Iran maintains that its nuclear energy programme is purely for civilian and peaceful purposes.
“Any agreement would see more oil being poured into an already flooded market” agreed Oanda analyst Craig Erlam. “That additional supply is likely to weigh further on prices if an agreement is reached.”
Oil has collapsed by 60 per cent in value since June on the back of a burgeoning supply glut.
Prices had rallied the previous week as Saudi Arabian jets struck rebel targets in Yemen sparking supply fears in the crude-rich Middle East.
By Thursday on London’s Intercontinental Exchange Brent North Sea crude for delivery in May plunged to $54.80 per barrel from $57.81 a week earlier.
On the New York Mercantile Exchange West Texas Intermediate or light sweet crude for May slid to $49.29 compared with $50.16 a week earlier.
Precious metals
Gold climbed as investors sought the safety of the precious metal.
“Gold prices rallied on the back of weak employment data and rising geopolitical tensions” said Natixis analyst Bernard Dahdah.
“In addition to the stalemate between the P5+1 and Iran in Lausanne rumours circulated that Greece might be unable to meet its scheduled Internatinoal Monetary Fund repayment on April 9.”
Gold is regarded by investors as a safe bet in times of geopolitical and economic uncertainty.
By Thursday on the London Bullion Market the price of gold firmed to $1198.50 an ounce from $1195.75 a week earlier.
Silver weakened to $16.84 an ounce from $17.14. On the London Platinum and Palladium Market platinum gained ground to stand at $1154 an ounce from $1138. Palladium increased to $751 an ounce from $748.
Base Metals
Nickel and tin tumbled close to six-year low points on oversupply woes and demand fears in China and Europe.
“The nickel and tin markets are oversupplied” wrote Commerzbank analysts in a note to clients.
Tin prices sank on Wednesday to a near six-year trough at $16389.50 per tonne while nickel hit a similar low at $12310 a tonne.
“Nickel prices have crashed and burned last week falling to six-year lows” added Macquarie analysts.
“The immediate cause appears to be heavy fund short selling based on reports of extremely weak demand from stainless steel — nickel’s main use — in Europe and China.”
By Thursday on the London Metal Exchange copper for delivery in three months declined to $5993 a tonne from $6069 a week earlier.
Three-month aluminium eased to $1774.50 per tonne from $1778.50. Three-month lead advanced to $1870 a tonne from $1829. Three-month tin tanked to $16750 a tonne from $17285. Three-month nickel slid to $12935 a tonne from $13375. Three-month zinc edged higher to $2107.50 a tonne from $2081.50.
Sugar
London prices sank close to a six-year trough at $355 after similar recent falls in New York as the market was shaken once again by the weak Brazilian Real currency and plentiful stockpiles. “Sugar closed lower as a weaker Real and big global stocks remain in the forefront” added Price Futures Group analyst Jack Scoville.
By Thursday on LIFFE London’s futures exchange a tonne of white sugar for delivery in May fell to $361.10 from $362.90 a week earlier. On ICE Futures US unrefined sugar for May rose to 12.46 US cents a pound from 12.31 US cents.
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