The Commodities Feed: Oil holds firm as Middle East breakthrough remains elusive

Oil maintains a firm position at above $100 per barrel, despite concerns over Middle East stability. Throughout the trading day, prices initially dropped but quickly recovered most of their losses, a pattern that continues. The International Energy Agency (IEA) is set to release the remaining 100 million barrels of strategic oil reserves, adding to the ample supply amid the Persian Gulf supply shortfall.

This release includes 20 million barrels of diesel, which will be released promptly. However, the US might not be satisfied with the quantity, especially for diesel, potentially leading to restrictions on US diesel exports. Meanwhile, Russia is considering easing sanctions on its tankers to reduce fuel costs, which could free up tanker capacity for the global market.

US crude oil inventories dropped by 8.56 million barrels last week, the largest weekly decline since February, largely due to hurricane activity and offshore production curtailment. US refined product utilization rates reached their highest seasonal levels in over two decades, while gasoline stocks rose by 3.52 million barrels. Iron ore prices briefly dipped below $90 per ton, the lowest since November 2022, due to weak Chinese demand and ample global supply.

Despite steel inventories rising in China, production cuts remain possible, and further supply entering the market suggests iron ore prices will stay rangebound. Cocoa prices rose slightly, fueled by stronger demand numbers: European cocoa grindings increased 10% quarter-on-quarter, marking the first annual rise since Q2 2024. Global corn and wheat ending stocks also saw marginal increases, supported by stronger-than-expected demand.