MARKET BRIEFING – LONDON OPEN 18.01.2016
Much to the displeasure of the Saudi’s and their Gulf allies, most of the economic sanctions that were placed on Iran have been lifted.
However, this victory for Tehran was tempered by news from Washington that the United States had imposed new, limited sanctions against eleven entities and individuals that are associated with Iran’s ballistic missile programme.
This positive news for Iran is also good news for global business as it allows this country to come back into the international fold and transact in global commerce.
Iran after many years of sanctions is in urgent need for a renewal of its infrastructure. This will bring many opportunities to foreign businesses who are looking for a slice of the action. It has already been reported for example that Airbus Industries is in line to capture a major 114 airliner order from Iran now that sanctions have been lifted.
There will also be a monetary windfall for the Iranian Government as it will finally have access to some USD 100 billion in assets that were frozen and off limits.
However, the lifting of the embargo means that Iran is now free to ramp up its output of Crude Oil. Presently, Iran pumps out 1.1 million barrels of oil on a daily basis for export. Now that the embargo has been lifted, Iran is now free to use its spare capacity to increase exports by 500,000 barrels per day. Once the infrastructure is in place and if customers can be found Iran plans to further increase production by a further 500,000 barrels per day.
With Iran increasing production the price of crude which is already under significant pressure could be set to fall further.
In the past, Saudi Arabia has been able to maintain its market share by squeezing high cost of extraction businesses such as the US Shale producers. However, such a policy would be difficult to implement against Iran for a variety of reasons.
Iran enjoys a relatively low cost of production which will enable it to ride out any further price shocks. Furthermore, the Iran government is committed for political reasons to increase production as this would be in line with its geopolitical ambitions of confronting the Saudi’s over the leading role in Syria and Iraq.
Crude has been used before as a political lever. One only needs to look back to 1973 oil embargo that was imposed due to the Arab-Israeli conflict. Once again, it would appear that simple rules of demand and supply will be distorted as the political imperative takes centre stage as Riyadh and Tehran fight over regional supremacy.
EURUSD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.0992
Target 2: 1.0820
Projected range in ATR’s: 0.0105
Daily control level: 1.0830
GBPUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.4361
Target 2: 1.4169
Projected range in ATR’s: 0.0113
Daily control level: 1.4450
USDJPY
The intraday technical outlook
Trend 1 hour: Down
Target 1: 117.64
Target 2: 116.35
Projected range in ATR’s: 1.01
Daily control level: 118.30
USDCHF
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.0103
Target 2: 0.9953
Projected range in ATR’s: 0.0104
Daily control level: 1.0060
USDCAD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.4639
Target 2: 1.4471
Projected range in ATR’s: 0.0133
Daily control level: 1.4325
AUDUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 0.6925
Target 2: 0.6832
Projected range in ATR’s: 0.0099
Daily control level: 0.7005
GOLD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1104.00
Target 2: 1077.00
Projected range in ATR’s: 15.31
Daily control level: 1096.00
OIL
The intraday technical outlook
Trend 1 hour: Down
Target 1: 30.00
Target 2: 27.50
Projected range in ATR’s: 1.7593
Daily control level: 31.85
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