Geopolitical Risks and Weather Disruptions Drive Commodity Markets
Oil prices remain well-supported despite increasing supply from the Persian Gulf, as geopolitical risks continue to weigh on the market. The region's nervousness is expected to persist until there are signs of progress in a potential deal between the US and Iran. Recent reports indicated that Saudi Arabia’s East-West pipeline was targeted again, though the attack did not disrupt flows. Oil producers in the region are adapting to the volatile situation, with Kuwait operating at 75% of pre-war levels and Saudi Arabia cutting the official selling price of its Arab Light into Asia for November loadings.
The European gas market remains vulnerable, with EU gas storage levels just shy of 73% full, down from 83% at the same stage last year and below the 5-year average of 88%. While LNG flows from the Persian Gulf have picked up recently, the region will struggle to hit storage targets ahead of winter. The severity of the gas market tightness will largely depend on the weather, with a strong El Niño raising hopes for a milder winter.
Copper prices edged higher due to tight physical conditions and concerns over potential US copper tariffs, which have encouraged metal to flow into the US market. Demand from electrification, renewable energy infrastructure, and data center investment continues to support copper prices. In precious metals, gold edged higher as investors sought safe-haven assets amid growing fiscal concerns in Europe, though gains may be capped by elevated Treasury yields, persistent inflation concerns, and a firmer US dollar.
Sugar prices rose for a third consecutive session, with No. 11 raw sugar climbing more than 4% and breaking above USc20/lb. The rally is driven by tightening global supplies due to adverse weather conditions threatening production across key regions. El Niño-related disruptions have shifted market expectations from a projected surplus to a potential global deficit. In Brazil, excessive rainfall has disrupted cane harvesting and crushing operations, while in India, below-normal monsoon rainfall has lowered production forecasts.
Ukraine’s Agriculture Ministry reported that grain and legume exports for the 2026/27 harvest season fell 26% year-on-year to 5.4mt as of 5 October. Total corn shipments more than doubled to 2mt, while wheat shipments fell 43% year-on-year to 2.9mt. The decline in overall exports reflects ongoing disruptions to Black Sea trade flows amid continued Russian and Ukrainian attacks, adding uncertainty to regional shipping and logistics.