Oil eyes Iran nuclear talks
Crude prices are in wait-and-see mode until the fifth round of negotiations to revive the Iran nuclear deal are done. Energy traders need to know how much Iranian crude is going to hit the market and that will only be known once the sanction relief part is finalized. The oil market is expecting to see 500,000 bpd increase in exports starting sometime after the summer, but no one knows if it could be more or if certain benchmarks will need to be met before any relief comes Iran’s way.
Expectations remain strong for the Iran nuclear deal revival to get done and if Iran can return 500,000 of flows by the end of summer, Brent could hover in the mid-to-high USD60s.
Gold/Bitcoin
Gold’s favorite word is now “transitory”. Gold’s favorite two words are “crypto crash”.
Gold prices rose after some soft economic data and another round of Fed speak (Quarles, Evans, and Barkin) confirmed the transitory theme across markets. The Fed has been consistent in its message to the market that higher inflation is transitory, and there are no plans to tighten policy.
The transitory expectations with inflation have sent Treasury yields lower, with the 10-year yield now lower by 2.0 basis points at 1.581%. Gold has eyes for USD1,900 after another drop in yields, lower Bitcoin, and softening economic data.
Bitcoin was gold’s kryptonite for a good part of the first four months of the year, but environmental and regulatory concerns have put a tentative end over its relentless buying. Bitcoin has a mining transition problem brewing. The environmental concerns appear to be a short-term problem, thanks to MicroStrategy’s Saylor and Tesla’s Musk, but getting migrating mining operations out of China is a short-term hurdle that could be a drag on prices. China’s crackdown is happening and the pressure is high to get the mining elsewhere.