See gold at $1,100/oz; oil at low $50s/bbl by Dec-end: ANZ

Nigel: Firstly, how will the Iran nuclear deal help Brent crude prices and by when according to you?

A: The initial reaction from the markets was negative and we saw crude oil prices sell off about two percent. But slowly over the course of the day, as details emerged, prices started to recover. I think that was a result of the detail in the agreement which showed that supply or at least exports from Iran probably will not hit the market until 2016 when I think a lot were expecting those to be immediately lifted. So, sanction relief is going to take a lot longer than expected and thus in the shorter-term the physical oil market will not see much of a change.

But ultimately in this environment where we are getting, where markets are looking for supply cuts, this is ultimately a bearish signal even if the supply is coming later than expected. Ultimately, over the next few months we would expect to see this weigh on crude oil prices as I suppose the realisation that supply is still coming does start to be priced in.

Reema: We got a very interesting reaction in crude prices. After an initial dip, they stabilised and in fact moved higher overnight. Where do you see Brent crude prices by the end of the year?

A: I think we are still looking for prices in the low USD 50s. Ending the year, probably just below where we are now around the USD 55 a barrel for Brent, that is. And that is on the proviso that we do see some sort of a cut to US supply which we obviously have not seen just yet and the continued improvement in demand that we are seeing both in China and the US.

Obviously, this could change things. Certainly into 2016, we will be looking at a much more balanced market, but if we did see another million barrels a day of oil come from Iran, we could certainly see those prices, those relatively low prices for much longer than we normally expected.

Nigel: But what can Brent crude prices be once the Iran nuclear deal, say potentially kicks in entirely? It could even be in the longer-term with global demand-supply being ceteris paribus.

A: It is a hard question to answer, but certainly if we looked at it right now, if we suddenly had a million barrels a day additional of Iranian crude hitting the market, then we would expect to see Brent prices in the USD 40s to be honest. But, obviously there are a lot of issues at play within that and a lot of different scenarios, I suppose which could come out of it. So, it is certainly a very volatile environment, very volatile time and I think prices obviously still have potential downside risks but certainly over the longer-term as well this will weigh on prices for some time to come.

Reema: Are metal prices reacting today to the Chinese GDP figure which came out; Q2 at seven percent?

A: It was obviously a much better than expected number although there were some peculiarities within those. But in general, taken very positively and so the metals have been pushing higher which, after I suppose quite a rout that we saw last week on the back of the collapse in the Chinese stock market. We are certainly seeing a little bit of short covering on the back of this stronger than expected data and overall, the macro environment has been slowly improving and despite these macro events, including Greece as well, the environment for consumption of metals has been trending a little bit higher. So, this is, I suppose, just a continuation of that and metals are seeing the benefit of that in price action today.

Nigel: What is your outlook on base metal prices in light of the fact that growth in China is indeed slowing - a medium to long-term outlook versus a short-term outlook.

A: In light of the growth projection that we have seen China go through over the past 12-18 month, it is clear that we are going to enter in a period of lower growth and we have certainly factored that into our numbers for a lot of the metals. But, metals, a few in particular, ones such as nickel and zinc, do benefit later in the life cycle of an economy like China and as such we still think that the intensity of use for those is quite positive over the next few years. And metals as well have certain supply-side constraints which a lot of the other commodity markets do not have. We did not see the build up in supply like we did in markets such as oil and iron ore over the course of the past few years and that has meant those markets are a little bit tighter. But obviously with lower growth coming from China, we do expect to see pricing remaining a little bit more subdued but we think in the metals market, they should start to recover in the second half of this year and we think gradually improve over the course of the next few years.

Reema: What is the call on gold, it has been largely range bound. What is the outlook and the next trigger for it to it see upside?

A: It has been very much range bound, stuck around that USD 1,160-1,180/ounce. It's surprising considering the risk off trade that has been playing out as a result of the Chinese equity market collapse and the Greek debt crisis. I suppose it just highlights the lack of investor appetite for gold at the moment and they have been pushing towards US dollar in this environment. However, for the outlook though, it still looks relatively poor considering investor demand is weak - that's backing up on what is weak physical demand as well at the moment which points to further weakness ahead. If you then consider, I suppose the Fed and how it moves in terms of its interest rate policy over the next six months which we expect to those rate rises to start kicking in that will obviously further weigh on the price. We could certainly see gold back down close to USD 1,100/ounce over the next six months.

Nigel: We have Janet Yellen giving a congressional statement later today. What is your outlook on the commodities and the background of Yellen potentially raising interest rates maybe by even September?

A: I think the result of that is a stronger US dollar and that has ultimately been a significant headwind for commodities. So on the back of that it is going to be a difficult period for commodities but if you consider a positive macro backdrop particularly in Asia and China, I think that probably why those negatives, but it is going to be a slow growing; we are certainly not expecting to see a rebound in commodity prices that we have in previous cycles but we do expect to remain cyclical and that means slightly better prices but ultimately H1 is going to be driven more at its own supply and demand fundamentals. So this is going to be a lot more divergent seen in the past. So markets which are oversupplied such as oil and iron ore probably won't recover as quickly as we suspect we will see in markets like the base metals.