Greece and EURO crisis – commodity trading news

Published: 1 July, 2015 11:50

During the past week, headlines have centred on the crisis in Greece and its default on Eur 1.6 billion (£1.1 billion) of loan repayments to the IMF. Euro zone ministers refused to extend its bailout, having failed to agree on some of the terms and conditions. The group chairperson (Dutch Finance Minister, Jeroen Dijsselbloem) had previously said it would be “crazy” to extend the Greek bailout beyond its Tuesday deadline. Nonetheless, judging from reports after a conference telephone call with other Euro zone ministers, this position may have ameliorated as a fresh Greek application for an aid programme of some €29.1bn was to be considered today (Wednesday).

There may be a knock-on effect on oil prices. Although production in June exceeded previous targets (in spite of curbed supplies from Nigeria and Libya), prices still increased by 11 per cent over the first half of the current year. A barrel of crude is currently valued at around $59 on the New York Mercantile Exchange (August West Texas Intermediate crude CLQ5) and over $63 a barrel on the London futures exchange.

Pressure over the negotiations around Iran’s nuclear programme would tend to increase oil prices, although the deadline has now been extended to 7th July. In contrast, however, some online commodity trading analysts are concerned that if Iranian sanctions are eased, Iran’s previous output will resume and add millions of barrels oil to the global market. This could well produce downward price pressure, perhaps towards $50 a barrel. Developments in Greece are also significant – in the case of a possible ‘ripple’ effect (financial contagion), demand in the economies of other peripheral countries such as Portugal, Italy and Spain may be adversely affected, leading to even lower oil prices.

So far, no rush for historically ’safe’ gold investments has materialised.

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