What to watch in commodities: Iran, big oil, miners, gold, crops

(Bloomberg) — It’s getting ugly out there. Commodities are getting shaken up as investors fret about the fall-out from the global trade war, and as the White House turns up the heat against Iran. President Donald Trump just fired off a blunt, tweeting a threat to counterpart Hassan Rouhani, and U.S. Secretary of State Michael Pompeo upped the ante with his own remarks in California.

Against that backdrop, this week is one of the busiest of the quarter as earnings pour in. Big Oil heads the list, with Royal Dutch Shell Plc and Exxon Mobil Corp. among those reporting. With base metals under pressure and gold offering little haven, watch for outlooks from Freeport-McMoRan Inc., Anglo American Plc, Barrick Gold Corp. and Newmont Mining Corp. Rounding out the picture, we’ll see how crops are doing on both sides of the Atlantic.

Before getting stuck in, it’s worth flagging where signals may come from about the next steps in the trade showdown, apart of course from the twittersphere. This week the World Trade Organization General Council meets on the U.S.-China standoff; Nafta negotiators try try to make headway in Washington; and leaders from the BRICS nations get together in Johannesburg.

Gulfs Apart

Commodity investors will have their attention fixed on Iran this week and into August after Donald Trump’s all-caps threat to the leadership of the major oil producer, and his counterpart’s earlier warning that any conflict would be the “mother of all wars.” Brent crude slipped after rising as much as 2 percent Monday. “Mother of all wars.”

There are likely to be plenty more verbal barbs in the coming days. Secretary of State Pompeo has an opportunity for comment on Iran later Monday after a consultation with his Australian counterparts; on Tuesday he’ll host a Ministerial to Advance Religious Freedom event in Washington; and then midweek he’s speaking to the Senate Foreign Relations Committee. Early August sees the initial 90-day deadline for tightened sanctions against Tehran.

It’s a Gusher

After driving costs down to survive a plunge in the crude price that started in 2014, the oil industry is now riding a rebound toward some of the fattest profit margins they’ve ever seen. The only question is: what are they going to do with the extra money? Some of the answers will start to come in on Thursday and Friday, when in addition to the quarterly figures from Shell, Exxon and Chevron, Total SA and ConocoPhillips are set to report their numbers.

Investors are pushing for share buybacks after enduring belt-tightening measures used to survive the downturn that diluted their holdings. But even after buying back shares and paying dividends, a group of nine integrated oil companies will probably have an extra $8 billion in cash, according to Royal Bank of Canada. That may mean majors are now scouring the globe for more barrels, marking the end of austerity and a return to bigger spending.

Lightning Rods

After six straight weeks of declines, copper and other metals will be in focus again, as assets that have become a lightning rod for concerns about the growing fallout from a global trade war. China’s policy response will be key here, as investors wait to see whether it will offer some support to the yuan, which has slumped in lockstep with copper over the past few weeks.

Anglo American is among the first to report earnings and investors, who have been raking in big returns from the mining industry will be keenly watching out for news on Thursday about the company’s interim dividend plans, as well as the status of approval for a new $6 billion copper mine in Peru. Freeport, the largest publicly traded copper producer, will also release its second-quarter results. Analysts are on the lookout for any update on the Phoenix-based miner’s Grasberg copper-and-gold project and when it expects to finally reach a deal with Indonesia allowing it to continue operating its flagship mine.

Navigating the Downturn

Top gold producers Barrick and Newmont are among the companies turning in their report cards for the second quarter at a time when the price of the precious metal is languishing at a one-year low. Investors will be looking for clues on how miners are managing costs and their progress in paring debt.Investors will be looking for clues.

In the case of Barrick, analysts are hoping for an update on talks with Tanzania to lift a ban on the export of concentrates produced by Acacia Mining Plc. Barrick owns 64 percent of Acacia. Investors may also be eager to hear directly from Barrick about its intention toward Detour Gold Corp. Barrick was said to be the undisclosed miner that was asked to sign a confidentiality agreement alongside Paulson & Co. to discuss potentially buying Detour.

Data Dump

Earnings this week from two of the top producers of diggers and dump trucks will offer valuable clues on how commodity demand is looking as trade tensions rise. Figures from Japan’s Hitachi Construction Machinery Co., which reports on Wednesday, and Komatsu Ltd. two days later are especially useful as they come before U.S. giant Caterpillar Inc. announces results on July 30.

As sellers of equipment to the mining and construction industries, the two manufacturers are keyed in to the pace of growth in China, the world’s biggest consumer of metals and energy. This year, the U.S.-China showdown has taken a toll, with their shares dropping from highs in January amid concerns that the trade war will slow China’s economy and curb its appetite for commodities.

Weather Woes

As if global trade tensions weren’t enough to worry the world’s farmers, dodgy weather is making their life difficult too. Heatwaves and drought in northern Europe have hurt wheat, barley and other crops, while production in France, the European Union’s top grower, is expected to shrink due to excessive rains. Put together, the bloc’s wheat output is poised to be the smallest in six years, according to Strategie Grains. A Monday report by the bloc’s Monitoring Agricultural Resources unit will shed further light on the extent of the damage.Dodgy weather is making their life difficult too.

Over in North America, analysts and traders will tour wheat areas in North Dakota. Another group will travel to Manitoba, Saskatchewan and Alberta to gauge the condition of the grain, canola and other crops. Earlier this month, the U.S. Department of Agriculture trimmed its estimate for global production as dryness in parts of the European Union, Russia, Ukraine and Australia hurt their harvest outlook.

Bulls Versus Bears

Prospects for declining global output are fueling optimism on the outlook for wheat prices. Eleven of 20 traders and analysts surveyed by Bloomberg were bullish on the grain. Sentiment was also positive for corn and soybeans.

In the metals market, traders were most bearish on gold since December as bullion hovered around a one-year low. Sentiment was also negative on copper. Terminal subscribers can see the other commodity surveys here.

For the Diary

MONDAY, JULY 23

EU monthly report on crop progress, weather conditions Asia Supergrid Symposium in Tokyo Global Agribusiness Forum in Sao Paulo. Speakers include Brazil Agriculture Minister Blairo Maggi USDA data for grain-export inspections, monthly cold-storage, crop-progress report EARNINGS: Posco, Cal-Maine Foods Inc., Steel Dynamics Inc., Halliburton Co.TUESDAY, JULY 24

Mexico hosts Summit of the Pacific Alliance. Outgoing President Enrique Pena Nieto joins President-elect Andres Manuel Lopez Obrador to meet with leaders from Peru, Colombia, Chile. Through Wednesday CSIS Energy & National Security Program hosts EIA Administrator Linda Capuano, who’ll present EIA’s International Energy Outlook 2018 JSW Steel AGM Japan Iron and Steel Federation briefing American Petroleum Institute weekly inventories data EARNINGS: Peabody Energy Corp.WEDNESDAY, JULY 25

S. Africa President Cyril Ramaphosa hosts leaders of BRICS nations — Brazil, Russia, India, China — for summit in Johannesburg World Trade Organization Director General Roberto Azevedo briefs journalists at United Nations in Geneva Preliminary August loading program for Russian Urals crude U.S. Energy Information Administration weekly oil inventory report EARNINGS: JSW Steel Ltd., Hitachi Construction Machinery Co., Fibria Celulose SA, Freeport-McMoRan Inc., Vale SA, Barrick Gold Corp., Agnico Eagle Mines Ltd., Hess Corp., Saipem SpATHURSDAY, JULY 26

World Trade Organization General Council meeting to cover issues related to U.S.-China trade conflict. Though Friday Talks to renegotiate North American Free Trade Agreement restart in Washington. Negotiators from Mexico, the U.S. and Canada will attend. International Grains Council monthly report on supply, demand Newcrest Mining Ltd. quarterly production report Fortescue Metals Group Ltd. quarterly production report U.S. Energy Information Administration weekly U.S. gas inventory report USDA weekly figures for crop net-export sales EARNINGS: Anglo American Plc, Royal Dutch Shell Plc, ConocoPhillips, Repsol SA, Total SA, Teck Resources Ltd., Newmont Mining Corp., Husky Energy Inc., Helmerich & Payne Inc., Marathon Petroleum Corp., Valero Energy Corp., PG&E Corp., Edison International, First Solar, Hitachi Metals Ltd., PTT Exploration & Production PclFRIDAY, JULY 27

Agricultural ministers from G-20 meet. In Buenos Aires, through Saturday ICE weekly commitments of traders report for Brent, gasoil Baker Hughes Inc. rig count for oil and gas in the U.S. CFTC weekly commitments of traders report Bullion Federation Global Convention, New Delhi, through Sunday Posco shareholders meet to consider Choi Jung-Woo for CEO EARNINGS: Pemex, Exxon Mobil Corp., Chevron Corp., Cabot Oil & Gas Corp., Weatherford International Plc, Phillips 66, Eni SpA, SK Innovation Co., Komatsu Ltd.

What We’ve Been Reading

Trade War Spills Into Uranium as U.S. Weighs Import Tariffs A Whiff of Rotten Eggs May Augur an Oil Shock: David Fickling As Trade War Cost Grows, Farmers Stick With Trump — for Now

(By Agnieszka de Sousa, Kelly Gilblom and Kevin Crowley)