The Commodities Feed: Oil Has Its Worst Quarter Since 2020

Oil prices came under further pressure yesterday, leaving ICE Brent to close out its weakest quarter since 2020, dragged down by growing confidence that Persian Gulf crude flows are on the mend

Energy - US crude oil production and exports surge to record levels

The oil market finished the second quarter yesterday weak, with ICE Brent down a little more than 38% in the April-June period, the weakest quarterly performance since the first quarter of 2020 when the Covid crisis slammed demand. The oil market continues to take an optimistic view on a supply recovery from the Persian Gulf, despite recent flare-ups between the US and Iran. Indirect talks in Doha this week have reportedly been positive.

Tanker vessel movements in the Strait of Hormuz still appear limited. Total tanker crossings, which include both inbound and outbound movements, are estimated at around 11 on Tuesday, down from a peak of 24 last Wednesday. Admittedly, there has been a slight pickup in inbound tanker traffic, suggesting that shipowners are becoming increasingly confident about moving vessels into the Persian Gulf. If this trend accelerates, it becomes a clear headwind—and potentially a direct challenge—to our view that oil prices should rise from current levels.

The latest data from the EIA shows that the US boosted crude oil production to a record level in April. Supply climbed to a record 13.93m b/d, up 1.6% month-on-month and 3.5% higher year-on-year. Monthly figures echo the weekly trend, showing total crude and petroleum product exports surging to a new record 13.61m b/d in April, up 1.74m b/d MoM and 3.26m b/d YoY. The surge in US oil exports has helped the market offset some of the supply losses from the Persian Gulf.

Numbers overnight from the API show that US crude oil inventories continue to fall despite some normalisation in Persian Gulf flows. Crude inventories reportedly fell by 6.07m barrels over the last week. Gasoline inventories are estimated to have fallen 2.11m barrels over the week, while distillate stocks increased by 2.9m barrels. The more widely followed EIA weekly report will be released later today.

There are reports that China eased restrictions on refined product exports after tightening controls on exports during the early stages of the war in the Persian Gulf. The government reportedly told some state refiners that they can resume exports of gasoline and diesel. Obviously, exports will still have to fall within government quotas. While the move does help ease some tightness concerns in product markets, particularly for middle distillates, we still expect middle distillate cracks to remain well supported. This is due to a longer post-war recovery in refined product supply and the potential for Russian export restrictions on diesel.

In the natural gas market, QatarEnergy reportedly extended force majeure on some LNG shipments to Asia and Europe until August, and in some cases into early September. This suggests that the LNG market could see a more gradual recovery in supplies following the temporary peace deal between the US and Iran. This leaves Europe more vulnerable as it moves through the injection season with lower-than-usual storage. It's likely to head into winter with storage levels below target.

Metals gain as markets watch Iran talks

Industrial metals moved higher on Tuesday as investors monitored renewed US-Iran talks and the outlook for US monetary policy. Copper climbed back above $13,300/t, supported by easing concerns over disruptions to shipping through the Strait of Hormuz.

Aluminium remained under pressure, however, as the fading geopolitical risk premium continued to unwind. The metal is on track for its steepest monthly decline since 2008, reversing much of the earlier rally driven by fears of supply disruptions in the Middle East.

Positioning turned less supportive. LME aluminium speculative net longs fell for a third straight week to 68,814 lots in the week ending 26 June. This is the lowest since May 2021, as short positions rose sharply amid easing concerns over the Strait of Hormuz. Copper net longs also declined for a fourth consecutive week to 48,735 lots, while zinc net longs fell for a third week to 28,222 lots, the lowest since October 2025.

Metals markets are increasingly focused on the Federal Reserve. Expectations that US rates could remain higher for longer are supporting the dollar, creating a headwind for commodities.

In precious metals, gold stabilised around the $4,000/oz level after recent losses. Easing geopolitical tensions are reducing safe-haven demand, while expectations of a more hawkish Fed weighs on sentiment. A stronger dollar and higher yields remain challenging for non-yielding assets, although lingering uncertainty around the Middle East continues to offer some support.

Agriculture – USDA reports increase in grain inventories

In its quarterly stocks report, the USDA reported that corn inventories stood at 5,295m bushels as of 1 June, up 14% YoY. This was lower than the market expectations of 5,414m bushels. For soybeans, the agency reported inventories of 1,061m bushels, up 5% YoY and above the 1,050m bushels expected by the market. The increase was primarily due to weaker exports to China. Similarly, wheat inventories were reported at 920m bushels, up 8% YoY but below market expectations of around 931m bushels.

Meanwhile, USDA’s latest acreage report estimates corn and wheat plantings will drop this year, while soybean acreage will increase. It projects 2026 corn acreage at 95.3m acres, lower than the 98.8m acres planted in 2025, and in line with the previous estimate of 95.3m acres. Similarly, the USDA projects 2026 wheat plantings at 42.7m acres, down from the 45.3m acres planted in 2025 and below the March estimate of 43.8m acres. Soybean planting estimates were raised to 85.4m acres, higher than the 81.2m acres planted in 2025, and above the previous estimate of 84.7m acres.