Energy – Oil rallies despite OPEC+ supply increase
While prices initially slid yesterday following a larger-than-expected OPEC+ supply hike, the market managed to turn positive with Brent settling almost 1.9% higher on the day. The increase in August Saudi official selling prices provided some comfort. Furthermore, the market is still tight in the near term. This is reflected in the strength in the prompt Brent timespread. The expected supply surplus won’t materialise until later this year, when we expect more sustained downward price pressure.
Increased attacks on vessels passing through the Red Sea by the Houthis in Yemen provided further support to the market yesterday. Further attacks could see an increase once again in vessels avoiding the Red Sea. Instead, they would take a longer route around the Cape of Good Hope.
The middle distillate market continues to show increasing signs of tightness. The ICE gasoil crack remains well supported around US$24/bbl, while the prompt ICE gasoil timespread surged to a backwardation of more than $56/t. Speculators hold their largest net long in gasoil since July 2024. Middle distillate inventories in the US are at their lowest in more than two decades for this time of the year. In Europe, and specifically the Amsterdam-Rotterdam-Antwerp region, gasoil stocks have been trending lower since February. Stronger middle distillate cracks, along with growing OPEC+ oil supply, should support stronger yields in the months ahead. Still, this is worth keeping an eye on, given the potential risk of moving into the northern hemisphere winter with relatively low middle distillate stocks.
Metals – China adds more gold to its reserves
China’s central bank added gold to its reserves for an eighth consecutive month in June. The People’s Bank of China added 70,000 troy ounces (~2.2 tonnes) of gold to its reserves, taking the total to 73.9 million troy ounces (2,298.5 tonnes). China has purchased a total of 1.1m troy ounces (~34.2 tonnes) since restarting its purchases in November 2024. Meanwhile, recent data from the World Gold Council shows that overall central bank net purchases stood at 20 tonnes in May. The National Bank of Poland was the largest buyer in 2025 so far, adding 67 tonnes of gold to its reserves.
In ferrous metals, steel inventories at major Chinese steel mills fell (after rising for two consecutive weeks) to 15.5mt in late June. This is down 4.7% compared to mid-June, according to data from the China Iron and Steel Association (CISA). However, steel inventories are still 5.1% higher than in the same period last year. Crude steel production at major mills fell by almost 1% from mid-June to 2.13mt/d in late June amid weak demand.
Agriculture – US corn crop remains in good condition
The USDA’s latest crop progress report shows that the US corn crop is in relatively good condition, with 74% of the crop rated good-to-excellent as of 6 July. This is up from 73% a week ago and 68% at the same stage last year. In contrast, 66% of the soybean crop is rated good-to-excellent, compared to 68% at the same stage last year. Finally, the winter wheat harvest is progressing well, with 53% of the crop harvested. This is well above the 37% harvested a week ago, but below the 62% at the same stage last year and below the 5-year average of 54%.
The latest CFTC data shows that speculators boosted their net short in CBOT corn by selling 24,181 lots. This leaves them a net short of 206,463 lots, the most bearish position since August 2024. The US is set for record supplies in 2025/26 amid higher acreage and yields, which will drive domestic inventories higher. Meanwhile, the net speculative long position in CBOT soybeans decreased by 23,023 lots for a second straight week to just 425 lots.
Source: ING