The Commodities Feed: Oil shrugs off Bessent’s ‘D-day’ plan for Iran

Oil prices remained steady this morning, clinging to yesterday's declines following a 2.35% drop for ICE Brent. The market's reaction to the US' push for sanctions against Iran was largely muted, with traders viewing the economic pressure as insignificant rather than a catalyst for change. The US had imposed over 70 sanctions targeting Iran, warning secondary sanctions would follow any non-compliance with halting trade ties.

China, the biggest purchaser of Iranian energy, remained uncertain about the US risking a precarious trade alliance with Beijing over these secondary penalties. The market awaited more specifics on a potential schedule for partners to disentangle from Iran. Supply anxieties were mounting in the European gas market, especially with storage levels, as the region drew nearer to the heating season.

TTF front-month futures ended nearly 3.7% higher the previous day, breaking above EUR68/MWh and reaching their greatest level since March. EU gas storage stood at just under 63% capacity, below the 5-year average of 80% and also falling short of the near 76% seen at the same time last year. At this pace, hitting the lower storage goal of 75% before the heating season appeared challenging.

This situation heightened the risk of forced purchases, increasing the upside potential for gas prices. In metals, copper gained ground after fresh withdrawals from LME warehouses reignited worries about constrained exchange inventories. LME canceled warrants rose by 51.4kt, the highest single-day increase since May. Most cancellations occurred in US and Asian locations.

This move came after a sharp squeeze in the nearby market, pushing prompt premiums to record highs. Recent deliveries into LME warehouses helped alleviate some of the tightness, but the most recent withdrawal hinted that any inventory recovery might be short-lived. Inventory movements continued to be a critical focus, with exchange stocks remaining relatively low.

Copper remained buoyed by strong metal flows into the US, with elevated US premiums driving shipments to the country, tightening availability elsewhere. Record-high prices fueled demand concerns, particularly in China. While physical market conditions remained robust, buyers grew increasingly cautious as prices continued to surge.

Copper also benefited from a weaker US dollar and remained up almost 15% year-to-date. For now, tight inventories and ongoing US-bound flows seemed the primary drivers, leaving the market susceptible to further tightness and volatility. In agriculture, corn prices climbed on lower harvest expectations. CBOT corn prices kept rising the previous day, as doubts about a smaller US crop and ongoing Black Sea tensions spurred supply concerns.

The Pro Farmer crop tour indicated a US corn crop of 15.3 billion bushels with an average yield of 173.2bu/acre, significantly below the USDA's production estimate of 16.01 billion bushels and yield estimate of 180.7bu/acre. EU corn yields were expected to decline further, with the European Commission's latest MARS report forecasting output at 6.61 tons/hectare, down from a previous projection of 6.93 tons/hectare and below the five-year average of 7.1 tons/hectare.

Persistent hot and dry weather in Western and Central Europe led to reduced summer crop yields. Yield estimates for wheat improved from 5.66 tons/hectare to 5.68 tons/hectare, in line with the five-year average. Meanwhile, the Indian Sugar Mills Association (ISMA) cut its 2025/26 gross sugar production forecast to 30.9 million tons from an initial estimate of 34.5 million tons (including volumes for ethanol production).

The lower numbers were attributed to adverse weather, reduced cane yields, and weaker sugar recovery rates. International demand stood at 28 to 28.5 million tons. To support domestic supply and rein in prices, the government introduced a duty-free import window, tightened stock-holding limits, continued special crushing operations, and facilitated an early start to the new harvest.