The outcome of US-Iran nuclear talks today will be key to the direction of
Energy- US-Iran Talks Set to Take Place
It’s a big day for oil markets with all eyes on US-Iran nuclear talks, which are scheduled for later today. A constructive resolution would likely prompt the market to gradually unwind as much as a $10/bbl risk premium, which we believe is currently priced in. If talks break down, the upside risk remains, but the market may hold off on a full reaction until the scale of potential US action against Iran becomes clearer.
Targeted and brief strikes that avoid energy infrastructure (like those seen last year) with limited retaliation from Iran, would likely provide a brief spike higher in oil prices. The move, though, would likely be short-lived. Longer-term action from the US, with more aggressive retaliation from Iran, would increase supply risks for the oil market. This would make any further price increases more sustainable.
While the flat price remains well supported amid geopolitical uncertainty, ICE timespreads have come under much more pressure recently, suggesting the physical market is becoming increasingly well supplied. Kazakh oil flows from the CPC terminal are normalising following disruptions earlier this year. Floating storage continues to decline, indicating that previously stranded sanctioned barrels are finally finding buyers and moving toward their destinations. If we are to see de-escalation between the US and Iran, it should allow weaker fundamentals to feed through to a lower flat price — particularly if OPEC+ resumes supply increases from April, which we believe they will agree to this weekend.
Yesterday’s inventory data from the Energy Information Administration (EIA) was bearish. The EIA reported that US crude oil inventories increased by 15.99m barrels over the last week- the largest weekly increase since February 2023. The increase was dominated by inventory builds on the Gulf Coast. Crude oil imports increased by 135k b/d WoW, while exports fell by 277k b/d. Refiners also reduced their run rates by 2.4 percentage points to 88.6%, which added to the inventory build. For refined products, gasoline saw an inventory drawdown of 1.01m barrels, while distillate fuel oil stocks grew modestly by 252k barrels.
European storage continues to trend lower, although at a slower pace amid milder weather. Gas storage is about 30% full, well below the 5-year average of 47%. Storage is on track to finish the heating season near or below 2022 levels. However, the ramp-up of LNG export capacity continues to offer some comfort to the market. The latest positioning data shows little change in the TTF investment fund position over the week, with funds continuing to hold a net long of 109.5TWh.
There’s growing noise within the EU for reform of the Emission Trading System (ETS), with 10 EU industry ministers yesterday calling for changes to the EU ETS to make Europe more competitive. The ministers said that “decarbonisation should not be achieved by deindustrialisation”. The European Commission is set to propose reforms to the EU ETS by the third quarter. We are likely to experience increased noise until then. Investment funds have been spooked by growing calls for changes to the EU ETS. The latest positioning data shows funds sold 13.6k contracts over the last reporting week, leaving them with a net long of 68.8k contracts. This is down significantly from the 126k net long held back in mid-January.
Metals – Gold Finds a Footing Above $5,000/oz
is pushing higher this week, supported by renewed uncertainty around US trade policy and rising geopolitical tensions with Iran, lifting safe‑haven demand. Momentum is returning after a period of consolidation, with a weaker providing support. Silver has also strengthened, rising above $90/oz at times.
Gold has now recovered more than half of the losses seen during the sharp sell-off late last month. Geopolitical risks remain a key upside factor; any escalation in tensions involving Iran is likely to add further support and reinforce gold’s role as a hedge against shocks.
At the same time, the structural drivers behind gold’s earlier rally remain firmly in place. Central‑bank buying continues, ETF inflows have resumed following the late‑January pullback, and expectations of lower interest rates later this year remain supportive for non-yielding assets.
Agriculture – ISMA Lowers Indian Sugar Output Estimates
The Indian Sugar Mills Association (ISMA) revised its 2025/26 gross production estimate to 32.4mt, including volumes diverted to ethanol, due to heavy rainfall reducing sugarcane yields in key producing regions. This is down from an earlier estimate of 34.35mt. Net sugar production (excluding ethanol diversion) was lowered to 29.3mt amid lower yields, compared with the previous estimate of about 30.95mt. Domestic sugar consumption is now expected to reach 28.3mt, while exports are projected at 700kt for 2025/26, below the earlier estimate of 1 mt.
Reports indicate that traders have resumed purchases from the Ivory Coast after the national regulator, Le Conseil du Café‑Cacao (CCC), agreed to sell beans at global market prices. This offsets earlier premiums that had stalled buying. The CCC allowed forward sales for the upcoming April mid‑crop without applying the usual quality and living income differential premiums.
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