Oil Prices Fall for the Second Consecutive Week, Focus on Peace Meetings

While some of us have taken a well-deserved summer break, the world has not stopped. On the contrary, it has been quite active, especially in the context of geopolitics and the potential creation of a new world order. Unsurprisingly, much of this revolves around US President Donald Trump. Will all these numerous meetings yield some peace in the world, or will the rift between the two blocs only increase? It is hard to say, but judging by the initial reactions in the markets, part of the risk premium has disappeared, leading to a decline in commodity futures prices. The best example is oil.

There is also the still-relevant topic of tariffs. Negotiations with the EU may have concluded, but those with China are still awaited. This is the next hot potato for the upcoming autumn. And perhaps this autumn we will see the long-anticipated reduction in interest rates by the US FED. The constant balancing act between inflation and the optimal moment for a rate cut has been a topic for months, and although many have already expected a rate cut, it has not yet occurred this year. In this context, the markets will be watching the speech of FED Chairman Jerome Powell on Friday, looking for hints in his speech regarding a potential rate cut as early as September.

As for the week ahead, the market focus will be on weather conditions in the northern hemisphere related to the upcoming harvest, then on global demand for commodities, and we must not forget the movement of the US dollar. The US stock market is at new record levels, where investor optimism is significant, and we will see if it spills over into the commodity markets. Trump’s discussions regarding peace in Ukraine continue, and there could always be some surprises for the markets.

Natural Gas at Lowest Level Since Last May

On global markets, oil prices fell again last week, the second consecutive week, as traders fear that due to increased production from OPEC and partners next year, supply will significantly exceed demand. As a result, the price of Brent oil is again hovering around the level of $66/bbl, where it was last seen at the end of June. Brent oil prices have fallen by about ten percent this month. Due to the slow growth of the global economy and the announced increase in production from OPEC+ members, the International Energy Agency (IEA) has announced that the market is on track to record a record oversupply next year. In its latest forecasts, the IEA has raised its oil supply estimate for 2025 and now expects supply this year to grow three times stronger than demand.

The agency predicts that oil supply in 2025 will increase by 2.5 million barrels per day, raising its previous estimate which predicted an increase of 2.1 million. At the same time, it has slightly lowered its forecast for global oil demand growth for this year and now expects demand growth to be only 680,000 barrels per day. Traders are also concerned about the weakness of demand in the US. Data from the American Petroleum Institute showed that crude oil inventories in the US rose by 1.5 million barrels in the week ending August 8. A separate report from the US Energy Information Administration (EIA) showed that during the same period, crude oil inventories in the world’s largest economy increased by 3.037 million barrels. Additionally, much of the future movement of oil prices depends on the meetings between Trump, Putin, and Zelensky. Any resolution to the Russia-Ukraine war could lead to the lifting of sanctions on Russian energy exports, allowing for the free trade of Russian crude oil.

European futures contracts for natural gas have fallen to around €31/MWh, approaching the lowest level since May 2024. As with oil, the price of gas also heavily depends on the current peace negotiations. Prices have extended last week’s decline of 4.4 percent in hopes that an agreement could eventually restore Russian energy flows to global markets. While Europe has diversified its gas supply away from Russia, traders are betting that easing sanctions could alleviate global competition for LNG cargoes. Separately, Norway reported an unplanned outage at its LNG facility in Hammerfest.

Record Harvest in the US

When it comes to agricultural exchanges worldwide, the focus is currently on the US and the state of crops. Currently, corn is in excellent condition there, with expected excellent yields, which will lead to a record harvest in the US. Similarly, soybeans are in perfect condition, so the USDA is expected to revise upward its production estimates in the next report. Wheat, on the other hand, is more balanced in terms of fundamentals, but it will be affected by the depressed corn market. In Brazil, investments in seeds and corn are increasing, as prices are profitable for local operators. There is concern that there will be an oversupply if China does not increase imports, especially of soybeans. Overall, the market has bearish potential, and only an external shock could change this scenario.

Prices are low, prompting speculators to cash in their positions and reduce risk, although no bullish signs are visible on the horizon. Grain prices on Euronext have also fallen, feeling the pressure from the Russian wheat harvest and the corn harvest in the US. Optimism also prevails regarding corn yields in the EU. As for the position of funds, they remain significantly short, totaling 60.7 million tons. Of this, the most significant is wheat, totaling 34.4 million tons, of which 13 million tons are short on MATIF.

Copper prices are hovering around $4.5/lbs, remaining in a sideways trading range as investors continue to assess supply-side disruptions. This is a significant price drop compared to a month ago when the price was $5.8/lbs. Meanwhile, prices have remained close to the lowest levels in a four-month period as traders assessed the implications of US tariff exemptions on certain copper products.

Refined copper has been excluded from planned US import tariffs of 50 percent, leaving domestic traders with large inventories. Instead, tariffs will be directed at copper semi-finished products such as wires and pipes, while ore, cathodes, and concentrates – the most common copper imports to the US – will be spared. The suspension of underground operations at Codelco’s El Teniente mine has reduced short-term production estimates by 20 to 30 thousand metric tons. Nevertheless, the Chilean state copper miner has confirmed its price forecast of $9,500/t for the next two years.