The Commodities Feed: Oil rises amid US-Iran conflict

Oil prices continued to climb for a fourth straight day on Wednesday as tensions between the United States and Iran persisted, fueling concerns about potential disruptions to supply. US President Donald Trump dismissed any possibility of negotiations with Tehran and hinted at the possibility of imposing further sanctions. Reduced vessel traffic through the Strait of Hormuz added to the market's apprehension over possible oil supply shortages.

The oil market also benefited from a slightly upbeat report on US crude inventories, which showed a significant drop of 328,000 barrels last week, surpassing expectations of a 74,000-barrel reduction. WTI crude inventories in the Cushing delivery hub declined by 1.4 million barrels, while product inventories experienced mixed results, with gasoline stocks increasing by 1.1 million barrels and distillate inventories falling by 2.8 million barrels.

The next inventory report from the Energy Information Administration (EIA) is expected later in the day. Diesel crack spreads reached a record high of over $100 per barrel, driven by global refining constraints and supply disruptions, marking a more than 20% increase month-to-date since the US-Iran conflict began. Russia's export restrictions, following Ukrainian drone attacks on refineries, have led to a reduction in diesel availability, while disruptions to energy infrastructure elsewhere have heightened supply concerns, contributing to the price surge.

Meanwhile, copper prices slipped below $14,000 per tonne, marking their steepest decline since July 23, as fresh deliveries to LME warehouses eased a prolonged supply crunch. Inventories at the LME rose by 20,025 tonnes, the largest single-day increase since April 7, with most of the additional stock piling up in Asian and US warehouses.

This surge in supplies helped alleviate tightness, following strong shipments to the US facilitated by tariff-related arbitrage. As a result, the LME cash/3-month copper spread narrowed to $248 per tonne, while the tom-next spread also retreated after hitting levels not seen since the 2021 copper squeeze. In the copper market, speculators reduced their net long positions by 6,340 lots to 53,914 lots, ending a two-week trend of increases despite higher copper prices.

Aluminium prices saw a decline in net long positions, with money managers cutting 2,267 lots to 78,492 lots, primarily due to a 22,874-lot increase in gross short positions. Zinc net longs also fell, dropping by 7,602 lots to 37,759 lots, as of the previous Friday. Sugar prices rose for the second consecutive day, settling nearly 3.6% higher at its strongest level since May 2025.

The increase was fueled by reports that India might consider lowering or eliminating its 100% import duty to replenish domestic supplies ahead of a seasonal demand surge. Sugar prices have surged more than 16% this month due to tightening global supplies. Speculative net long positions in sugar climbed to 58,990 lots, the most bullish sentiment since April 2025.

The rise in sugar prices was further supported by weather-related risks, with El Niño potentially impacting sugar production in Asia, and above-average rainfall in Brazil disrupting sugarcane processing, exacerbating supply concerns.