There’s also increasing concern whether the U.S. will pull out of a deal between Iran and global powers that eased sanctions on the OPEC nation in exchange for curbs on its nuclear program. The appointment of John Bolton as National Security Advisor and Mike Pompeo as Secretary of State, both vocal Iran hawks, has significantly increased the odds of sanctions being reintroduced by President Donald Trump’s administration, Goldman said.
If that happens, European refiners may cut imports from Iran, given their exposure to the U.S., either through assets or product trade flows, according to the bank. “The EU accounts for 25 percent of Iran’s 2.6 million barrel-a-day crude exports but we believe the key for the global oil market is whether these flows will be curtailed rather than simply redirected to Asia,” the analysts wrote.
In the aluminum market, all parts of the supply chain are rushing to assess the risks of handling metal from Rusal, a company that Goldman said represents 6 percent of global output. The moves will drive significant disruption in the near term, according to the bank, which flagged upside risks to its end-year forecast of $1,950 a metric ton.
“We now expect aluminum prices to remain high and volatile through early June when markets will be forced to come to terms with the structure of the sanctions,” the Goldman analysts wrote.
Prices on the London Metal Exchange have jumped more than 12 percent this week to $2,296.50 a ton after surging to a six-year high on Thursday. Aluminum’s gains on the LME have outstripped increases in China in the past week, potentially making exports more profitable for the Asian nation’s traders just as their domestic market struggles with bloated stockpiles.
That dynamic, and a collapse in Rusal’s share value, will “incentivize a restructuring of Rusal’s assets and redirect global aluminum flows to establish a new equilibrium,” the Goldman Sachs analysts said. “There is significant upside risk and potential volatility as markets find the new equilibrium.”
This article was provided by Bloomberg News.