What's takeaway 1 on The Commodities Feed?

Oil prices are experiencing volatility due to geopolitical tensions.

What's takeaway 2 on The Commodities Feed?

The dominance of the Houthis' blockade poses significant risks to oil supply routes.

What are the market implications for The Commodities Feed?

Watch for any signs that the blockade is successful, which could lead to a significant rise in insurance costs and shipping times, tightening supply further. A sustained Brent price above $90/bbl could signal stronger bullish sentiment among traders.

What are the risks to this view on The Commodities Feed?

If the proposed ceasefire between the US and Iran gains traction, oil prices could stabilize or fall sharply. Additionally, if shipping routes through the Red Sea remain unaffected, the supply chain disruptions could be mitigated significantly.

The Commodities Feed: Oil stabilises despite Houthis’ Red Sea threat

What the desk is arguing

The desk believes that oil price stability will be tested by geopolitical tensions, particularly the naval blockade imposed by the Houthis. While signs of potential de-escalation between the US and Iran may provide some temporary relief, the significant risk to Saudi exports poses a serious threat to market stability. Per the full note from ing-think, Brent prices have recently fluctuated around the $90/bbl mark, indicating market wariness.

Despite recent upward pressure, current trading suggests that the market remains skeptical about the blockade's effectiveness. Recent output figures indicate that Saudi Arabia has ramped up exports significantly, moving 4.6 million barrels/day in June, up from just 1.3 million in January, but the newly announced blockade complicates the logistics of these shipments.

Geopolitical tensions and flooding on oil market supply chains due to potential disruptions notably contribute to increased oil price volatility, with the market yet to fully price in scenarios involving extended blockades or intensified conflict in the region.

Where it sits in our coverage

Given our current consensus view, we position oil prices around $1.075, with a range extending from $1.04 to $1.12. Relevant forecasts from key firms include: - jpmorgan: targeting $1.10 by Mar-26 - bofa: projecting a lower $1.04 for the same period

The desk's view aligns closely with jpmorgan, maintaining an optimistic outlook relative to the lower projections of bofa, reflecting broader uncertainties around oil supply amidst geopolitical strife.

How other firms see it

Aligned firms generally reflect a bullish stance on oil prices, indicating expectations of continued strength supported by underlying supply constraints. Contrary views often caution against price increases due to potential demand slowdowns, particularly in light of economic weakness in key consuming regions.

Traders should keep an eye on related currency pairs like USD/CAD and GBP/USD, which can be influenced by fluctuations in oil prices and shifts in commodity trade dynamics.

What the calendar says

As of now, there are no significant events on the calendar that could act as immediate catalysts for price movements, leaving traders reliant on geopolitical developments to gauge future oil price trends.

Articles The Commodities Feed: Oil stabilises despite Houthis’ Red Sea threat Published 03:18 Commodities daily Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Oil prices have eased amid hopes of some de-escalation between the US and Iran. Yet risks to Saudi oil exports from the Red Sea are increasing Warren Patterson and Ewa Manthey Energy - Hopes for de-escalation ease oil prices Oil prices closed higher yesterday but retreated from session peaks, leaving Brent back below $90/bbl by the close. Prices are trending lower in early morning trading today.

There’s some hope of de-escalation between the US and Iran. Reports are that mediators are proposing a 10-day ceasefire, which could put the Memorandum of Understanding (MoU) back on track. This won’t be an easy task.

Large divisions remain between the US and Iran. And President Trump said the US would retaliate following the deaths of several American troops. Additionally, the Houthis in Yemen announced a naval blockade on Saudi Arabia, putting oil supply at increased risk.

Since disruptions hit the Persian Gulf, the Saudis have increased exports from Yanbu in the Red Sea, shipping around 4.6m b/d of crude in June, up from around 1.3m b/d at the start of the year. An effective blockade would prevent oil flows to Asia moving south via the Bab el-Mandeb Strait. Instead, vessels would have to take the much longer route through the Suez Canal and go around Africa.

It’s yet to be seen how effective any blockade will be. But, clearly, this development will increase insurance costs. If shippers decide to avoid the Bab el-Mandeb Strait, voyage times will be longer and more expensive.

Looking at oil price action this morning, the market is not convinced that this blockade will be successful. The latest output data from China shows the pressure that refined products output is under as refineries reduce run rates amid the US-Iran war. Gasoline production in June fell 14.1% year-on-year to 10.75m tonnes.

Middle distillates production saw steeper declines, with diesel and kerosene output falling 21.3% YoY and 21.1%, respectively. The fall in middle distillates production, as well as refined product export restrictions, will add to the tightness concerns we’re seeing in the diesel market. The ICE gasoil crack, for example, remains near record levels.

Saudi crude oil exports from Red Sea picked up since Iran war but Houthi threat puts this supply at risk Saudi crude oil exports (m b/d) Source: LSEG, ING Research "> Source: LSEG, ING Research Metals - Copper supported by tightening China market Copper prices found support at the start of the week from tightening physical market conditions in China. Import premiums for copper - the Yangshan premium - surged to $100/t, their highest level in more than a year. This is up from just $20/t in late January, as scrap shortages boosted demand for refined metal and imports.

The tightness follows Beijing’s crackdown on invoice trading, which has disrupted scrap flows and constrained domestic supply. Maintenance outages at several Chinese smelters have also limited production. China’s copper inventories are now near the bottom of their seasonal range, while LME stocks are at their lowest since March as metal is drawn into the Chinese market.

Copper also continues to find support from expectations of potential US tariffs. LME copper was trading near $13,600/t during Monday’s trading session, up around 9% year-to-date. Tight inventories, strong import demand and falling exchange stocks suggest copper fundamentals remain supportive in the near term.

Still, concerns over global growth and the Fed outlook could limit further gains. The latest data from the International Aluminium Institute (IAI) showed global primary aluminium production fell 2.9% month-on-month and 1.5% year-on-year to 5.98mt in June, although first-half output remained broadly stable at 36.4mt. China’s aluminium production declined 3.2% month-on-month to 3.7mt in June, but year-to-date output was still 2.2% higher year-on-year at 22.3mt.

Production, meanwhile, weakened across most other major regions. Output in Europe (including Russia) fell 1.7% month-on-month, while Asia ex-China saw a 2.9% decline. Gulf production dropped to 332kt, down 34.5% year-on-year, reflecting the impact of disruptions linked to the Iran conflict.

Yemen WTI Saudi Arabia Refined products Red Sea Persian Gulf Middle distillates Iran Geopolitics Diesel shortage Copper Brent Aluminium Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Warren Patterson Head of Commodities Strategy Warren Patterson is Head of Commodities strategy based in Singapore.

He joined the bank in April 2016 and covers the entire commodities complex. Previously, he worked at a commodities trade house… Ewa Manthey Commodities Strategist Ewa Manthey is a Commodities Strategist based in London. She joined the bank in September 2022 and covers the entire commodities complex, with a particular focus on the metals markets.

She has… In this article Energy - Hopes for de-escalation ease oil prices Metals - Copper supported by tightening China market

The Commodities Feed: Oil stabilises despite Houthis’ Red Sea threat

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The Commodities Feed: Oil stabilises despite Houthis’ Red Sea threat

What the desk is arguing

Where it sits in our coverage

How other firms see it

What the calendar says

Sources & References

Primary source