Energy prices rose yesterday due to ongoing uncertainty in the Middle East. The tension in the region is keeping oil markets strong as investors wait for Israel’s response to Iran’s recent attack. This uncertainty is reflected in the Brent options market, where calls are becoming more expensive than puts as traders seek protection from potential price spikes.
Despite the current geopolitical risks, the oil balance looks stable through 2025. OPEC+ is expected to gradually increase oil supply by 2.2 million b/d, leading to a surplus in the market. This surplus will likely keep pressure on oil prices and weaken time spreads. European natural gas prices also rose, driven by Middle East tensions. While there are concerns about potential LNG supply disruptions, European fundamentals remain strong with storage levels above the five-year average.
Gold prices hit another record high yesterday amid escalating tensions in the Middle East and uncertainty surrounding the upcoming US election. Investors are turning to gold as a safe-haven asset in times of geopolitical instability. Gold has been one of the best-performing commodities this year, supported by rate cut expectations, central bank buying, and strong demand from Asia.
In the agriculture sector, weather conditions in West Africa are mixed. While rains in Cameroon and Nigeria have led to increased costs for cocoa farmers due to black pod disease, conditions in the Ivory Coast and Ghana remain favorable for pod development. The USDA’s crop progress report shows that the corn and soybean harvests in the US are progressing well, with exports remaining strong for both commodities. However, wheat shipments have slowed in recent weeks.
Overall, the commodities market outlook is influenced by geopolitical tensions in the Middle East, the upcoming US election, and global supply and demand dynamics. Investors are closely monitoring these factors to navigate the uncertainty and make informed decisions in the market. The future remains uncertain, but staying informed and understanding the various factors at play can help investors make sound choices in the commodities market.