Oil market reflects slim chance of supply disruption, Goldman analysts say
June 26 (Reuters) - Options markets suggest the probability of a disruption of oil flows through the Strait of Hormuz is just 4% following the Iran-Israel ceasefire, Goldman Sachs analysts said in a note on Thursday.
Fears that Iran could close the Strait of Hormuz after U.S. strikes on its nuclear facilities sent Brent crude futures to a high of $81.40 on Monday, but concerns eased in the wake of the truce declared the next day, sending crude back below $68.
The sharp drop in the geopolitical risk premium likely reflected traders' recent experiences with major geopolitical shocks without significant oil disruptions, Iran's restrained response, strong U.S. and China incentives to avoid large disruptions, and the likely shift to large inventory builds from the fall, Goldman analysts said.
Options markets see a 60% chance that Brent will stay in the $60s in three months and a 28% probability they would exceed $70, Goldman analysts said.
Were oil flows to be disrupted through the Strait of Hormuz, Brent would climb to $90 a barrel, they said.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Spectator
36 minutes ago
- Spectator
How Qatar helped Trump broker peace in Iran
Qatar is basking in its latest diplomatic success. On Monday evening, Qatari diplomats brokered a ceasefire between Israel and Iran. This truce remains intact despite Iran's parliamentary vote to suspend cooperation with the International Atomic Energy Agency (IAEA) nuclear watchdog and brinkmanship over alleged breaches of the ceasefire. Qatar's success was the product of years of tenacious diplomacy and capitalisation on time-tested partnerships with the key warring parties. During the summer of 2022, Qatar hosted indirect nuclear negotiations between US and Iranian officials. While these talks did not produce immediate results, Qatar continued its efforts. In August 2023, Qatar facilitated a US-Iran hostage deal that led to the unfreezing of $6 billion (£4.4 billion) in sanctioned Iranian funds and the release of five captive Americans. Qatar transformed a moment of grave peril into a historic opportunity for peace in the Middle East After President Donald Trump's return to the White House in January, Qatari officials discreetly engaged with their Omani counterparts on facilitating nuclear talks between the US and Iran. On 20 May, Qatari Prime Minister Sheikh Mohammed bin Abdulrahman al-Thani warned of the dire consequences of a 'nuclear race or round of escalation next to our countries' and suggested a trilateral format involving Oman, the US and Iran. When Israel instigated its Operation Rising Lion offensive against Iranian military infrastructure on 13 June, Qatar convened talks between energy companies on the war's economic fallout and coolly responded to the Iranian missile attack on its Al Udeid base to prevent an escalation spiral. The Qatar-brokered ceasefire deal is the culmination of an extraordinary comeback story which has seen Qatar transform vilification into grudging praise from Trump's closest allies. It also underscores Qatar's integral place within the grand strategies of Western powers in the Middle East and efficacy as a conflict arbiter in numerous global theatres of instability. Before Trump's inauguration, there were widespread expectations that his second presidency would witness a downturn in US-Qatar relations. Pressure groups accusing Qatar of supporting Hamas and of mediating between Israel and Hamas in bad faith had gained traction. These organisations influenced the views of key members of the Republican party. Bitter memories of Trump's initial alignment with the 2017 Saudi Arabia-led blockade against Qatar and dismissal of Secretary of State Rex Tillerson, who reportedly stopped Saudi Arabia and the UAE from invading Qatar, lingered uncomfortably on the horizon. Despite the negative signals emanating from his closest allies and past conduct, Trump had incrementally developed a much more sanguine view of Qatar's regional role and a warm relationship with its Emir, Sheikh Tamim bin Hamad al-Thani. Trump admired Qatar's role in brokering an end to the US's forever war in Afghanistan and growing investment footprint in the American economy. During their September 2024 meeting at his Palm Beach mansion Mar-a-Lago, Trump hailed the Qatari Emir's commitment to peace in the Middle East and pledged that his return to the White House would make US-Qatar relations 'even stronger'. Trump's historic two-day visit to Doha last month, the first by a sitting US president since George W. Bush gave his infamous 2003 'mission accomplished' speech at Al Udeid, energised Qatar's allies and detractors within the Maga universe in equal measure. US Special Envoy to the Middle East Steve Witkoff was undoubtedly a tacit supporter of the trip, as he had recently hailed Qatar's 'well-motivated' involvement in regional diplomacy. Qatar's offering of $243.5 billion (£177.4 billion) in economic deals to the US and pledge to invest $10 billion (£7.2 billion) in the Al Udeid base gratified Trump. For Qatar's critics, reports that it was in talks with the US for Doha to transfer a Boeing 747 for Trump to use as Air Force One became an obsessive point of focus. Texas Republican Senator Ted Cruz warned that the Qatari jet raised 'significant espionage and surveillance problems' and framed Trump's acceptance of it as a national security threat. In a not-so-implicit jab at Witkoff, Arkansas Republican Senator Tom Cotton lambasted Qatar's hosting of Hamas and warned that it was a less reliable US partner than Saudi Arabia or the UAE. Qatar's brokering of the Israel-Iran ceasefire deal will not end its divisive reputation, but it does underscore its ability to serve as a trouble-shooter and force-multiplier for the US in the Middle East. It is a vindication for Trump's decision to entrust the emirate with high-stakes diplomacy and should soften the strident criticisms of Witkoff in the conservative media echo chamber. Qatar's success will also elevate its status as a partner for the United Kingdom and counter the criticisms that accompanied Sheikh Tamim's state visit to London in December 2024. A recent Centre for Economics and Business Research (CEBR) report revealed that Qatar contributes £120 billion per year to the British economy. As the UK edges closer to a free trade agreement with the Gulf Cooperation Council (GCC) and seeks global partners to burnish its Global Britain agenda, Qatar has strategic value. It is little wonder that Prime Minister Keir Starmer consulted with Sheikh Tamim after the Al Udeid attacks and discussed facilitating the swift resolution of the Gaza war. Aside from shoring up its Western partnerships, Qatar's diplomatic success was a triumph for its national identity construction mission. As a relatively new country that only earned its independence in 1971 and a small nation with 330,000 native citizens, Qatar's outsized role as a conflict arbiter is a profound point of national pride. Mediation is even ensconced within Article 7 of the Qatari constitution. The trauma of Iran's attack created a palpable patriotic rally on the streets of Doha and Qatar's diplomatic achievement augmented that nationalist upsurge. The momentum generated by Qatar's arbitration triumph has already extended to other conflict theatres. On Wednesday, Foreign Ministry spokesman Majed al-Ansari declared that Qatar had been in touch with 'all sides' of the Gaza war and hailed Trump's sincerity about a potential Israel-Hamas ceasefire. As the families of Israeli hostages clamoured for the Israel-Iran ceasefire to lead to a truce-hostage deal in Gaza, Qatari diplomacy has highly visible allies. Beyond the Middle East, Qatar's global mediation efforts have received a shot in the arm. As Trump's efforts to facilitate US-Russia dialogue and an end to Russia's brutal invasion of Ukraine blew up in smoke, Qatari diplomats continue to broker the return of abducted Ukrainian children to their families. Earlier this month, Qatar advanced a draft peace proposal between the Democratic Republic of the Congo (DRC) and Rwanda-backed M-23 rebels. This plan follows months of Qatari shuttle diplomacy in the eastern Congo crisis and serves as a roadmap to end the DRC's three decades of bloody internecine strife. During the darkest phase of the US and Israel's war with Iran, Qatar transformed a moment of grave peril into a historic opportunity for peace in the Middle East. Now is the time for Trump to build on this success and fulfil his vow to be America's peace president.
Reuters
an hour ago
- Reuters
Congo's cobalt dilemma unresolved by extended export ban
LONDON, June 27 (Reuters) - The Democratic Republic of Congo has extended its ban on exports of cobalt by three months as the world's dominant producer of the battery metal tries to convert its supply power into pricing power. After rallying sharply in February, when the market was caught out by news of the original ban, the price reaction this time has been more muted. Some sort of extension was widely expected. Moreover, it has become clear the physical supply chain has so much accumulated inventory, Congo's muscle-flexing has yet to faze buyers. Neither are investors buying into an imminent turnaround in the market. Cobalt Holdings, which planned to list a physical cobalt investment vehicle, pulled its initial public offering on the London Stock Exchange earlier this month. Congo's cobalt dilemma is how to restrict supply of a metal that is mined as a by-product of copper, an even bigger revenue earner for the resource-rich country. It might do better to focus on its own role in the supply chain. It takes around 90 days to ship Congo's intermediate cobalt product to China for refining, meaning the full impact of the February export ban is delayed. China's imports of Congolese cobalt remained robust at over 50,000 metric tons in both March and April. Moreover, the Chinese supply chain is still bloated from consecutive years of market surplus. Consultancy Benchmark Mineral Intelligence estimates stocks of cobalt outside Congo amounted to 8-10 months of global consumption in the second quarter of this year. Even with extended export controls by the world's largest producer, BMI reckons cobalt hydroxide stocks in China will only become physically low towards the end of next year. The shift by Chinese electric vehicle manufacturers away from cobalt chemistry is compounding over-supply. The country's consumption of cobalt sulphate by the battery cathode sector fell last year, according to analysis by Shanghai Metal Market compiled for the Cobalt Institute. And since DRC has only stopped exports not production, stocks of intermediate cobalt are also piling up in Congo. Cobalt's by-product status means Congo cannot easily follow the lead of Indonesia, which has started using mine quotas to limit production of nickel, another battery metal with bombed-out pricing. Any mining restrictions on Congo's cobalt producers would inevitably impact production of copper, which is currently in hot demand. The London Metal Exchange copper price is riding high at close to $9,900 per ton given tight markets for the raw material and refined metal. Chinese operators in Congo, such as CMOC Group ( opens new tab, have every incentive to keep digging as much copper out of the ground as possible. The cobalt comes free with it. Congo is the world's largest cobalt-producing country and CMOC is the largest producing company. With limited leeway to force companies such as CMOC or Glencore (GLEN.L), opens new tab to produce less cobalt without forfeiting copper revenues, the government has been considering an export quota system. Enforcing export quotas rather than the current blanket ban, however, would be operationally tricky and would not tackle the inventory accumulating in the country. The potential for a renewed flood of Congolese supply in the event of a policy change would weigh heavily on the cobalt price. The Congolese government looks set a long stand-off with the cobalt market and it is not even clear what price level it is targeting. If it aims too high, there is a risk it will accelerate cobalt's loss of market-share in the battery sector. Congo is finding out that controlling supply and controlling market price are two very different things, particularly when the other end of the cobalt supply chain is thousands of miles away in China. It could do worse than look at another Indonesian tactic, which is to link exports to commitments to build downstream processing capacity. Indonesia has successfully used this linkage in both the nickel and copper sectors, where two new smelters are firing up this year as a result of ever tighter controls over exports of copper concentrate. While Congo is likely to struggle to exert lasting control over the cobalt price, it can use its dominant supply position to determine where it sits in the supply chain. In itself, that will not solve the problem of over-production of what is a copper by-product, but it would mean more revenue for each pound of metal dug out of the country's rich resource base. The opinions expressed here are those of the author, a columnist for Reuters.
Reuters
an hour ago
- Reuters
China's copper smelters win better-than-expected $0 TC/RC deal from Antofagasta, sources say
BEIJING/SINGAPORE, June 27 (Reuters) - Chilean miner Antofagasta (ANTO.L), opens new tab has agreed with some Chinese smelters to set copper concentrate processing fees at a record low of $0 per metric ton and $0 cent per pound, four sources with the knowledge of the matter told Reuters on Friday. The record low charges reflect a shortage of copper concentrate supply and compare with the 2025 annual benchmarks at $21.25 a ton and 2.125 cents per pound agreed between the Chilean company and Chinese smelters. One smelter and two analysts speaking on condition of anonymity described it as "better than expected". Antofagasta did not immediately respond to a request for comment outside of their office hours. The zero processing fee is a win for smelters, given spot charges are hovering around the negative $43 mark - implying smelters would have to pay copper miners for processing their concentrate. Nonetheless, the contracts will deepen smelter losses in China, the world's largest refined copper producer and consumer, as the fees are a key source of revenue. In time the new low could force some smelters to cut production, analysts, smelters and traders said. The concentrate supply shortage has intensified this year with more new smelter capacity coming online in China.
