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What a difference a month makes in commodity markets.

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Just a month back, we reviewed the delicate balance OPEC was facing in trying to drive prices higher without having to make further cuts in output.

It seemed every time they squeezed the market higher, greater U.S. shale output slowed the advance, yet OPEC lost market share.

But now the U.S. seems to be coming to OPEC’s aid.

The market was finely balanced after a loss of output from Libya, where a civil war is raging, and Venezuela, where state bankruptcy and U.S. sanctions have put output into what appears to be, if not terminal decline, then a fall that could take many years of investment before it can recover.

The Financial Times and the Times both reported this week that moves by the Trump administration to remove waivers previously granted to key oil-consuming countries has taken the market by surprise. The news caused oil prices to spike in anticipation of the market being deprived of Iranian production.

Japan, South Korea, Turkey, India and China will, according to the Financial Times, face pressure to cancel Iranian oil imports as the U.S. seeks to increase pressure on Tehran over what it sees as its role in state-sponsored regional terrorism.

Source: Refinitiv

The oil price has already risen sharply this year. Brent crude climbed 2.6% on Monday to $73.80 a barrel, after hitting a high of $74.31 in early Asia trading following the announcement by a U.S. official. West Texas Intermediate, the U.S. marker, rose as much as 1.2% to a high of $64.74, the highest intraday level in two weeks, the Financial Times reported.

According to the Financial Times, the U.S. hopes its traditional oil-producing allies will raise output to offset further falls in Iranian supply — as they did last year — but this decision is not without complications.

Saudi Arabia and OPEC are in conflict with the U.S. in wanting higher oil prices and a balanced market, yet the U.S. is making no efforts to restrict its own shale oil output, expecting OPEC to raise or lower its supply to keep prices stable.

The latest forecasts from major agencies, including OPEC and the U.S. Energy Information Administration, see the market in a deficit of up to 500,000 barrels a day this year, before more supplies from Iran — and possibly Venezuela and Libya — are lost, the Financial Times reports.

A tighter oil market will increase gasoline prices, contrary to a campaign pledge from the president to lower them. The U.S. still imports at least one-third of its oil supply and remains exposed to global oil prices, despite being the largest producer in the world this year.

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It would appear prices could rise further as the removal of waivers begins to bite and major consumers switch to other supply sources. Despite slower global growth, energy and transport costs look set to continue to rise. (We will be covering a development in marine transport next week that predicts higher container rates in 2019-20 and suggests supply chain managers should be factoring in higher costs later this year and next.)

The U.S. Department of Commerce. qingwa/Adobe Stock

This morning in metals news, a tariff exemption request by Allegheny Technologies, Inc., has been denied, miner Anglo-American saw its copper production rise in the first quarter and iron ore miners in the Indian state of Karnataka are stuck with millions of tons of unsold iron ore inventory.

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ATI Exemption Request Denied

The Trump administration last year imposed Section 232 tariffs on imported steel and aluminum, but allowed domestic firms to apply for exemptions if a certain product is not made domestically in the quality or quantity needed.

Thousands of exclusion requests have been approved to date. According to QuantGov, 21,464 steel exclusion requests had been approved as of March 18, 2019.

A request by Allegheny Technologies, Inc., however, was denied, the Pittsburgh Post-Gazette reported.

ATI released a statement expressing disappointment with the ruling.

“While we are disappointed that the U.S. Department of Commerce denied the JV’s Section 232 tariff exclusion request, it does not change our strategy of returning ATI’s Flat Roll Products segment to sustained profitability,” said Robert S. Wetherbee, ATI president and CEO. “Although we believe the unique status of the North American stainless steel industry warranted approval of our exclusion, we are committed to meeting our customers’ needs and delivering value to our shareholders. We will work with our joint venture partner to determine our next steps.”

Anglo-American Q1 Copper Output Rises

Miner Anglo-American announced its Q1 copper production rose 4% to 161,100 tons, Reuters reported.

The firm’s total output, however, fell 6% during the first quarter.

Karnataka Miners Stuck with 6.5M Tons of Iron Ore Inventory

Miners in the southwestern Indian state of Karnataka are stuck with 6.5 million tons of unsold iron ore, the Business Standard reported.

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According to the report, unsold ore accounts for more than 20% of iron ore production during fiscal year 2019.