The Commodities Feed: Oil Falls on Growing Deal Optimism

Oil & Companies News, 05/08/2026

Energy — Brent Falls Below $80/bbl on Deal Hopes

Oil prices extended their decline yesterday, with ICE Brent settling more than 5% lower and moving below $80/bbl. The weakness continued in early morning trading today. The latest pressure on the market comes amid growing signs that the US and Iran are moving closer to a potential short-term deal that could lead to the reopening of the Strait of Hormuz. There are suggestions that an agreement could be announced as soon as today, although reports that any deal would be temporary suggest the market should not overreact.

A wide gap still remains between the US and Iran on the management of the Strait of Hormuz and, of course, on the nuclear issue. As a result, there is a clear risk that any agreement could unravel quickly, as was seen with the Memorandum of Understanding. For now, tanker traffic through the Strait of Hormuz remains heavily constrained, leaving the global oil market tighter and making the region’s supply route a key focus for traders and refiners alike.

If a deal holds and oil flows from the Persian Gulf normalize, market attention would quickly shift to the supply-demand balance in the fourth quarter and in 2027. A recovery in Persian Gulf supplies, stronger OPEC+ output following on-paper supply increases during the war, and higher UAE supply all point to a very comfortable balance sheet in 2027. However, much of the expected surplus next year would be absorbed by restocking demand. The longer Middle East flows take to normalize, the larger and longer that restocking process is likely to be.

A sustained deal would also bring some relief to the middle distillates market, which is currently extremely tight. Recovering crude oil flows should allow refiners in Asia to lift run rates; refiners in China processed 18% less crude oil year-on-year in June. Persian Gulf refined product flows should also resume as refiners ramp up operations again, although that may take time. At the same time, the middle distillates market is facing additional disruption from lower diesel exports out of Russia, after a government ban tied to concerns over domestic fuel supplies.

Preliminary Bloomberg data show that OPEC production rose by 1.16m b/d month on month in July to 19.44m b/d. The increase was led mainly by Iraq, Saudi Arabia, and Kuwait. The rise follows the brief ceasefire between the US and Iran, although output remains well below pre-war levels.

Latest US inventory figures from the American Petroleum Institute showed crude oil inventories rising by 2.7m barrels over the past week, compared with market expectations for a decline of about 1.5m barrels. Crude stocks at Cushing also increased, rising by 2.4m barrels. Among refined products, gasoline inventories rose by 200k barrels, while distillate stocks fell by 1.2m barrels. Weekly EIA figures will be released later today.

Metals — Copper Breaks Above $14,000/t

Copper climbed above $14,000/t on the LME, reaching its highest level in two months as tight physical market conditions continued to support prices. Large volumes of copper have been drawn into the US amid ongoing uncertainty over potential import tariffs, reducing availability elsewhere and leaving inventories outside the US increasingly tight.

The squeeze is becoming more visible in exchange data. LME inventories have fallen to multi-month lows, while the market has moved deeper into backwardation, indicating strong demand for prompt supply. Tight availability has also been supported by continued shipments into China and limited buffer stocks across the market.

Speculative positioning also improved in copper and aluminium. Copper net longs rose by 6,863 lots to 54,946 lots, while aluminium net longs increased by 1,170 lots to 60,434 lots. Zinc net longs fell by 3,739 lots to 35,997 lots, ending a four-week run of gains.

We remain constructive on copper. Low inventories, continuing supply challenges, and strong long-term demand drivers should keep the market supported.

In precious metals, central banks added a net 51t of gold to reserves in June, bringing first-half purchases to 102t, according to the World Gold Council. Poland remained the largest buyer, adding 19t in June and 82t year to date, while China extended its buying streak to 20 months with an additional 15t purchase. Uzbekistan and Kazakhstan added 9t and 7t, respectively.

Russia sold 9t of gold in June, taking its year-to-date sales to 44t. Turkey reduced reserves by 2t and remains the largest net seller so far this year, with total sales of 83t.

Agriculture — Ukraine Grain Harvest

Latest data from Ukraine’s Agriculture Ministry show that farmers have harvested around 34% of the planted area for spring grains and legumes so far this season. This includes 2.7m hectares of wheat, or 53% of the planted area, yielding 12.5mt of wheat, slightly ahead of last year’s pace.

The ministry also stressed the need to expand grain storage capacity to protect upcoming harvests and reduce post-harvest losses. Export logistics remain a key challenge amid Russian attacks, underscoring why harvest progress alone does not remove pressure on the wider supply chain.

Source: ING tweet