The Commodities Feed: Supply Worries Remain As US Extends Russian Oil Waiver

(MENAFN- ING) Energy - Continued whipsaw movements driving oil market

The oil market continues to trade in wide ranges, and it remains extremely sensitive to Iran-related headlines amid current supply disruptions. ICE Brent traded almost in a $6/bbl range yesterday. Prices whipsawed after more aggressive rhetoric from President Trump coming into this week, followed by reports that the US offered a temporary sanction waiver on Iranian oil until an agreement between the US and Iran is reached. The US has not confirmed these reports. Meanwhile, Trump said he held off on strikes on Iran, scheduled for today, after pressure from a number of Gulf countries, with“serious negotiations” now taking place. One might think the oil market would become increasingly numb to these headlines. However, the scale of supply disruptions is significant and growing more concerning each day that oil flows remain halted.

The US extended a waiver that expired over the weekend, allowing the sale of Russian oil floating at sea for another 30 days. It allows sales until 17 June, with the aim of stabilising oil markets amid significant losses in the Persian Gulf. The extension will be welcomed by Asian buyers, who are most exposed to the ongoing disruptions in the Middle East.

The latest data from China show the impact of the ongoing supply disruptions on the domestic oil sector. Refineries in April processed 13.35m b/d of crude oil, down 5.8% year-on-year and the lowest level since August 2024. Apparent oil demand also came under pressure, falling 5.8% YoY to 13.03m b/d. However, it's important to remember that apparent demand doesn't account for changes in inventory. The number could be very different from true demand, particularly given that we likely saw large inventory drawdowns over the month.

Metals - Copper extends losses

Copper on the LME extended losses on Monday, pressured by inflation concerns tied to the Iran conflict and weaker Chinese data.

Escalating tensions between the US and Iran, along with higher oil prices, heightened fears of prolonged inflation and a tighter policy response. This is weighing on global growth and expectations for industrial demand.

The pullback comes after a strong run, with prices slipping from the recent highs hit just last week amid intensifying macro headwinds. Weaker Chinese data, including softer activity in investment, retail and industrial output, added to concerns about demand, particularly in the manufacturing sector. Broader market volatility and a firmer dollar have further weighed on investor appetite for metals.

Despite the recent softness, copper remains around 8% higher year-to-date. It's being supported by earlier gains driven by strong positioning, tech-related demand and ongoing supply constraints. Expectations of potential US tariff measures are also providing support, with strong US imports pulling metal away from global markets and tightening availability elsewhere.

Near-term, copper is likely to remain under pressure as macro risks dominate. The downside, though, may be limited by tight supply and responsive Chinese buying on dips.

Agriculture – Cocoa declines on improved supply outlook

London cocoa sold off for a fifth consecutive session yesterday. The market settled 5.24% lower on the day thanks to ample near-term supply despite potential El Niño risks for the next season. Market expectations point to a sizeable surplus in the 2025/26 season, supported by robust production and softer demand. Ivory Coast raised its output estimate to 2mt–2.2mt, aided by favourable weather, existing stock levels, and increased cross-border inflows. Exchange warehouse inventories in the US rose by 19.5k bags (145 lb) to 2.7m bags as of last Friday, reinforcing a comfortable supply outlook.

The International Sugar Organization (ISO) has revised its 2025/26 global surplus forecast upward to 2.2mt from 1.2mt, driven by record production of 182mt, up 3.5% year-on-year due to higher output in Pakistan, Thailand, and India. Global consumption is projected at 179.8mt. However, production is expected to decline by approximately 2mt in 2026/27 due to potential El Niño-related disruptions in Asia. That said, precautionary stockpiling, reduced fertiliser usage, lower field activity, and increased hedging by buyers may provide some price support.

Chinese Customs data indicate a 73% YoY decline in corn imports to 50kt in April, although cumulative imports rose 85.9% YoY to 820kt in the first four months. The drop reflects the reduced price competitiveness of imported corn alongside efforts to boost domestic production through advanced agricultural technologies. Wheat imports fell 14.8% YoY to 640kt in April, while cumulative imports rose 130.2% YoY to 2.43mt. Sugar imports declined 80.5% YoY to 30kt for the month, while cumulative imports are still up 129.2% YoY to 650kt.

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