The commodities feed: Oil cools off from the highs

Crude oil started the week on a soft note as the focus shifts toward discussions at this week's UN General Assembly (UNGA) summit and the Trump-Xi meeting, even as supply risks persist.

Energy - Brent down despite ongoing supply risks

Crude oil started the week on a softer footing, with ICE Brent falling around 2% to below $102/bbl and WTI easing to around $98/bbl. The pullback comes despite ongoing geopolitical risks and continued concerns over global oil supply disruptions. Profit-taking after recent gains, together with hopes for constructive discussions at this week's UN General Assembly (UNGA) and the upcoming Trump-Xi meeting, helped improve market sentiment.

Supply concerns remain elevated. Saudi Aramco has warned some European customers that it may be unable to allocate crude cargoes next month under long-term contracts as disruptions to the East-West pipeline limit crude availability at Yanbu. The pipeline was damaged in last week's drone attacks and could take several weeks to fully restart. Reduced Saudi supply has tightened the European market, with some North Sea crude grades trading at steep premiums to benchmark prices.

Meanwhile, speculative positioning remains firmly bullish. ICE data show money managers increased their net long Brent position by 16,904 lots over the past week to 282,657 lots as of last Tuesday, the largest net long since late May 2026. The increase was driven largely by short covering as investors continue to price in greater upside risk from Middle East supply disruptions.

Refined product markets also remain tight. August exports from key Asian suppliers declined amid constrained crude availability and refinery outages. India's gasoline and diesel exports fell 14.5% year-on-year and 19.2% YoY, respectively, while Chinese gasoline exports dropped 57.4% YoY. Although Chinese diesel exports increased, lower overall product availability from Asia has kept Western markets undersupplied and supported crack spreads. The ICE gasoil crack spread has risen to around $95/bbl this week, up from an average of roughly $74/bbl in August.

Metals - Gold edges lower

Gold edged lower at the start of the week as investors assessed the implications of the Federal Reserve's first rate hike since 2023 and the prospect of further policy tightening. Comments from Fed officials reinforced concerns that inflation remains elevated, supporting expectations that rates will stay higher for longer. While tighter monetary policy remains a headwind for bullion, ETF holdings are sitting at a six-month high, and continued central bank buying should help limit downside.

LME copper is holding above $14,500/t, supported by signs of improving Chinese demand. The Yangshan premium climbed to $124/t, its highest level since November 2022, signalling stronger import appetite, while domestic production eased slightly in August. Copper remains up more than 16% this year amid ongoing supply tightness driven by stronger US imports ahead of potential refined copper tariffs. Near-term price action is likely to remain range-bound as supply risks offset macro headwinds and markets await greater clarity on US trade policy.

Chinese August trade data showed unwrought aluminium and aluminium product imports fell 10% YoY to 290kt, reflecting stronger domestic supply. Steel imports also weakened, down 13.3% YoY to 430kt. Meanwhile, alumina exports surged 135.8% YoY to 430kt, supported by higher Chinese output and ongoing supply disruptions linked to tensions in the Middle East.

The latest SHFE data showed inventories declined across most base metals last week, with aluminium stocks falling for a 14th consecutive week to 321kt. Lead, nickel and zinc inventories also moved lower, reflecting steady demand and restocking activity. Copper was the exception, with stocks rising 2.4% WoW to 56kt, reversing three weeks of declines.

Agriculture - Cocoa declines as supply concerns ease

Cocoa prices extended their decline on Friday, with US cocoa falling around 8% as comfortable near-term supplies continued to weigh on the market. Prices are now down almost 18% this month, putting cocoa on track for its first monthly decline since February. Exchange-monitored inventories in both Europe and the US remain relatively ample, while demand recovery has been slow as manufacturers continue efforts to reduce cocoa usage following the period of elevated prices. Despite the recent sell-off, concerns over deteriorating crop prospects in Ivory Coast and Ghana, together with the risk of a strong El Niño event, continue to support expectations of a supply deficit in the 2026/27 season.

Western Australia's Grain Association raised its forecast for the 2026/27 wheat crop to 10mt from 9mt, reflecting improved rainfall and better yield prospects. However, output is still expected to fall short of last season's record 13.3mt harvest. While recent weather conditions have improved production potential, heat remains the key risk. Hot winds across major growing areas and limited rainfall forecasts are likely to keep crop conditions under pressure through the remainder of the season.

Chinese customs data show corn imports rose to 320kt in August, taking cumulative imports for the first eight months of the year to 1.7mt, up 91.1% YoY. The increase reflects efforts by traders to diversify sourcing away from the US amid rising trade tensions and policy uncertainty. Wheat imports also strengthened, rising 13.4% YoY to 260kt in August, while cumulative January-August imports increased 35.6% YoY to 3.5mt.

Russia's Agriculture Ministry reported that grain harvests had reached 120mt as of 18 September, including more than 90mt of wheat, with wheat harvesting around 92% complete. Meanwhile, farmers had sown 6m hectares of winter crops, against a target of more than 19m hectares for this year's planting campaign.

In France, crop conditions continue to deteriorate following the summer heatwave. The Agriculture Ministry reported that just 23% of the corn crop was rated good to excellent as of 14 September, down from the previous week and well below the 62% recorded a year ago. Harvest progress accelerated, with 27% of the crop collected, up from 9% the previous week and ahead of the five-year average of 5%.

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