The oil price fell by about 2% on Monday

Crude

The oil price fell by about 2% on Monday as jitters related to situation in Greece weighed on overall market sentiment. Price of the front-month contract on Brent therefore fell to a four-week low. Meanwhile, Reuters physical oil market data have confirmed earlier news about persisting overhang of supply in the Atlantic Basin as both CFD’s and Forties differentials are seen close to a multi-year lows.

Apart from Greece, the market focuses on possible signs of agreement between P5+1 countries and Iran on its nuclear program. Though no details are known yet (or at least we are unaware of any), the general conclusion is that the talks are likely to extend beyond the self-imposed deadline of 30th June. Let us recall that if the deal was reached, Iran could export as much as 30 – 40 million barrels of oil that is said to be kept in floating storage and could in the short term increase its oil production by more than 500 thousand barrels per day.

Both Greek debt saga and Iranian nuclear talks thus in our view pose a downside risk for oil prices. Moreover, a fresh round of negotiations between Libya’s internationally recognized government and self-declared one about reopening of pipelines blocked by protesters could support oil bears even further.

Metals

Base metals prices fell by about 1.3% on average on Monday, mainly thanks to a slump in nickel prices.

Moreover, the price of nickel fell even to a six-year low today in early trading as the Shanghai Exchange said it would accept nickel from Russian producer Norilsk to be delivered against its futures contracts.

Sharp decline in nickel prices is one of the surprises as the markets anticipated there would be a shortage of the metal, especially in China, due to a ban on exports of ores from Indonesia (which had, however, been to a large extent offset by imports of the ores from Philippines).

Chart of the day:

The price of nickel hit a sixyear low…