The commodities feed: US-Iran tensions provide support

NYMEX WTI edged higher in the early trading session as risk premium builds following Iranian naval drills carried out just ahead of US nuclear talks.

Energy - Oil risk premium rises

NYMEX WTI is extending gains for a second session this morning, trading around $63.5/bbl, after Iran conducted naval drills near a major oil transit choke-point. Reports suggest Iranian forces were active in the region of the Strait of Hormuz, just ahead of scheduled talks with the US later today. That said, thin liquidity due to Lunar New Year holidays has limited broader price moves, while markets also await Russia-Ukraine discussions beginning today.

Meanwhile, Russia experienced multiple overnight drone attacks, including at the Ilsky refinery in Krasnodar Krai, which triggered a large fire. The plant processes roughly 6.42mt of oil annually and is a key fuel supplier for Russian forces.

There are growing indications that Saudi Arabia’s crude exports to China will rise following a price cut to its flagship grade, now at its lowest level in more than five years for Asian buyers. Saudi Aramco may ship 56–57m bbl of crude next month, up from 48m bbl previously. Elsewhere in Asia, India could receive at least 1m bbl above its usual March volumes under long‑term contracts, while refiners in South Korea and Japan are also set to lift higher-than-normal flows.

Turning to gas, and US natural gas prices fell to $2.97/MMBtu, their lowest since 17 October, amid forecasts for warmer‑than‑usual conditions across most of the country. NOAA projects above‑normal temperatures, particularly in central and southern regions, over the next two weeks. Supply concerns have also eased following the recent US winter storm.

Metals – Complex edges lower

Base metals started the week on a quieter footing, with liquidity thin as most of Asia is closed for Lunar New Year and US markets were shut on Monday. Trading volumes were light and price action fairly contained.

Copper is holding under $13,000/t, consolidating after the recent run‑up and subsequent pullback. Aluminium is also softer, extending last week’s weakness after reports suggested President Trump may narrow the scope of upcoming import tariffs. That headline continues to hang over sentiment, adding another layer of uncertainty to the broader metals complex.

On the supply side, copper inventories continue to build. Readily available stocks on the LME rose again on Monday, and when combined with inventories in Shanghai, London and New York, the total is now above one million tonnes - the highest since 2003. Rising exchange stocks underline the recent cooling in physical demand, particularly from China, where high prices and the seasonal holiday slowdown have curbed near‑term buying interest.

Agriculture – Cocoa eases on higher crop estimates

Cocoa prices have come under heavy pressure, dropping to their lowest level since October 2023 and now down more than 70% from the record highs reached in late 2024. The decline is being driven largely by improving weather conditions across key producing regions, which are lifting expectations for stronger output. Rains have returned across much of West Africa, while the Harmattan has eased, supporting the development of new flowers, leaves, and pods.

At the same time, warehouses and ports in the Ivory Coast remain congested with unsold beans after exporters refused to pay elevated domestic farm-gate prices that exceeded international market levels. This backlog has added an additional layer of downward pressure on the market.

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