The Commodities Feed: Oil extends gains on supply concerns
Lead — The desk believes that rising geopolitical tensions, particularly around US-Iran relations and security concerns in the Strait of Hormuz, will continue to support the rally in oil prices, which are currently above $91 per barrel. Per the full note source, Saudi Arabia's attempts to diversify export routes outside the Persian Gulf could also influence supply dynamics. This bullish sentiment for oil is likely to be reflected in currency movements, particularly within energy-centric nations, as traders adjust their positions ahead of upcoming economic indicators.
What the desk is arguing
The desk argues that current geopolitical risks, combined with production concerns, are driving oil prices upward, which has implications for FX trading, particularly with energy-linked currencies. The source highlights that Brent oil has extended its gains for three consecutive sessions, supported by significant market fears regarding supply disruptions following the US government's stance on the Iran deal.
Furthermore, Saudi Arabia's shift to offering crude from alternative locations, such as off the coast of Oman, underscores the strategic efforts to mitigate risks in traditional routes, potentially stabilizing prices. Notably, the speculative net-long positions in oil have increased, indicating an overall bullish market sentiment.
Where it sits in our coverage
Our consensus target for EUR/USD is currently 1.1700, with a range of 1.1200 to 1.2000. Firms such as anz project a March 2026 target of 1.1609, while morganstanley sees a higher target of 1.2000 for the same period.
This desk's perspective aligns with the consensus that anticipates a strengthening of the Euro against the Dollar, particularly as energy prices remain elevated, potentially impacting trade balances. However, this outlook sits towards the upper bound of the consensus spread, reflecting optimism in cross-border energy trades and their FX implications.
How other firms see it
Several firms, including jpmorgan and commerzbank, are aligned with the desk's bullish view on oil's impact on related currencies, suggesting potential upward adjustments in their forecasts for energy-linked currencies. Conversely, firms like scotiabank project more conservative targets for GBP, indicating skepticism on maintaining current levels in some pairs.
Additionally, fluctuations in the USD/JPY directly respond to external commodity price changes, reinforcing the gas and oil prices' influence on broader currency markets. Watching these correlations will be crucial as oil prices evolve in the context of geopolitical tensions.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Brent oil prices have rallied above $91/bbl due to geopolitical tensions and supply concerns.
- 02Saudi Arabia's efforts to diversify export routes could influence oil supply dynamics positively.
- 03Speculative long positions in oil are at their highest since February, indicating a bullish sentiment.
- 04The EUR/USD is sitting at a consensus of 1.1700 amidst rising oil prices and geopolitical risks.
Market implications
Traders should watch for oil prices to respond to any further geopolitical developments, particularly in the Strait of Hormuz, as this could impact the EUR/USD pair significantly. A clear break above $91/bbl in oil could spur additional demand for energy-linked currencies.
Risks to this view
A sudden de-escalation of geopolitical tensions, especially related to Iran, could reverse the current bullish sentiment in oil prices. Additionally, if inventory levels unexpectedly rise in response to increased production, this could lead to a price correction.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Société Générale | Bearish | 1.1400 |
Scotiabank | Bearish | 1.1200 |
Commerzbank | Bullish | 1.2200 |
Articles The Commodities Feed: Oil extends gains on supply concerns Published 08:06 Commodities daily Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Oil prices remained supported by rising geopolitical risks and supply concerns Ewa Manthey and Warren Patterson Brent's rally has continued to extend Energy - Brent extends rally above $91/bbl Oil prices extended gains for a third consecutive session, with ICE Brent trading above $91/bbl. Sentiment remained supported by US President Donald Trump's decision not to extend the US-Iran peace agreement and continued security concerns in the Strait of Hormuz, raising fears of supply disruptions. Saudi Arabia is reportedly offering crude cargoes from locations off the coast of Oman, signalling efforts to expand export routes outside the Persian Gulf.
Saudi Aramco is marketing Arab Medium and Arab Heavy grades via ship-to-ship transfers from terminals including Sohar. Chinese refinery throughput fell 15.8% year-on-year to 12.5m b/d in July, highlighting weak refining activity. Apparent oil demand also declined 17.5% YoY to 12.04m b/d amid softer industrial activity, weak refining margins and growing EV adoption.
US natural gas prices fell 3.5%, pressured by rising production, cooler weather forecasts and comfortable storage levels. Inventories stood at 3.15Tcf as of 7 August, 6.7% above the five-year average. Middle distillates strengthened further, with the ICE gasoil crack nearing $76/t.
Support came from reports of Ukrainian attacks on Russia's Ust-Luga processing facility and ongoing Russian diesel export restrictions. Reflecting tighter market expectations, speculative net-long positions rose for a sixth consecutive week to their highest level since February. Metals - Gold extends rally; copper squeeze deepens Gold extended its recent advance, with prices holding above $4,400/oz after rebounding sharply from July lows near $3,900/oz.
The move has been supported by a weaker US dollar and growing market conviction that the Federal Reserve is close to the end of its tightening cycle, reducing the headwind from higher interest rates. Ongoing geopolitical tensions in the Middle East have also continued to underpin investor demand. Markets will look to the release of the Fed's latest meeting minutes for further direction, while developments in the Middle East remain a key upside risk for prices.
In base metals, copper prices pushed higher, with three-month LME copper trading above $14,000/t and approaching the record highs reached earlier this year. The rally continues to be driven by tightening nearby market conditions. The LME copper tom-next spread surged to a premium of $75/t yesterday, marking the widest spread since January, as a growing supply squeeze intensified ahead of potential import tariffs.
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