Even more OPEC oil?

With oversupply only shrinking slowly, oil prices look set to remain under pressure, especially since a conclusion of a final nuclear agreement with Iran would bring additional oil from the country to the market. 

Oil prices have recently fallen as OPEC output turned out high in June and US crude oil stocks rose for the first time in nine weeks. Additional downside pressure next week could come from a final nuclear agreement with Iran. The recent presentation of a first draft has made it more likely that an agreement will be concluded by 7 July. 

It is uncertain how much oil Iran would be able to place on the market and how soon. But the current oversupply would in any event decline more slowly, as Saudi Arabia seems unwilling to reduce its market share. Instead, it might become clear on Monday that the state-run oil company, Saudi Aramco, will grant its Asian customers further price discounts. 

This should confirm that Saudi Arabia not only produced more oil in June to meet its own elevated summer demands, but also to secure export shares. As a consequence, oil prices should continue to decline next week, even though the US Energy Information Administration (EIA) and the International Energy Agency (IEA) will probably raise their forecasts for global oil demand further. Incidentally, the IEA will present forecasts for 2016 for the first time, says Commerzbank.

Following its recent grains stock report, the US Department of Agriculture (USDA) may raise its estimate of demand for US corn and soybeans and lower the final stocks for the 2014/15season. Forecasts for US corn and cotton production in 2015/16 should also be revised downwards, because the acreage will likely be smaller than previously assumed. 

And estimates for wheat production in the EU and in Canada will probably be lowered due to the drought in these regions. But these changes by the USDA are unlikely to give an additional boost to prices that have already increased massively of late.