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Energy – The diesel rally persists

ICE Brent settled a little more than 1% higher yesterday, with the market moving closer to the $65/bbl level. Market participants appear more concerned about supply risks than the odds of a surplus going forward.

These concerns are clearly reflected in the middle distillate market, where the ICE gasoil crack continued to rally. It’s now above US$38/bbl, up from around $23/bbl in mid-October. Meanwhile, the prompt ICE gasoil timspread surged to a backwardation of more than $43/t. Worries over Russian diesel supply amid sanctions and Ukrainian attacks on Russian refineries are driving the market's strength.

The strength in the middle distillate market should prompt refiners to maximise yields on middle-of-the-barrel products. Meanwhile, broader strength in refinery margins should support refinery runs. The strength in refinery margins certainly makes a more bearish view of the crude oil market less likely.

ICE Futures Europe said that the delivery of diesel under the ICE gasoil contract, which is produced from Russian oil in third countries, will be banned from January. This move by the exchange aligns with the EU ban on refined products derived from Russian oil, which also comes into effect in January.

Numbers overnight from the American Petroleum Institute show that US crude oil inventories increased by 4.4m barrels over the last week. Refined products also saw stock builds, with gasoline and distillate stocks increasing by 1.5m barrels and 600k barrels, respectively. Overall, the report was relatively bearish. However, the market will be more focused on the release of the widely followed US Energy Information Administration (EIA) inventory numbers later today.

Metals – Freeport targets 2026 restart at Grasberg
 

Freeport said it plans to restore copper production at its Grasberg operations in Indonesia drove a rally in copper prices. A September mudslide led the miner to declare force majeure. It restarted production from two parts of the copper mine in late October (the Deep Mill Level Zone and Big Gossan) and plans to ramp up at the Grasberg Block Cave underground mine in the second quarter of 2026. Freeport expects Grasberg to produce about one billion pounds of copper and nearly one million ounces of gold in 2026. That’s roughly 10% lower than what the company estimated in September following the incident.

The partial restart at Grasberg will help to ease supply challenges for smelters facing feedstock shortages. Grasberg is the world’s second-largest copper mine, contributing around 4% of global production.

Copper supply has been hit by a wave of disruptions this year. The disruption at Grasberg has added to the already high number of supply problems this year, including flooding at the Kamoa-Kakula mine in the Democratic Republic of the Congo (DRC) in May and an accident at the El Teniente mine in Chile in July.

Data from China’s National Bureau of Statistics (NBS) show that refined copper output rose 8.9% year on year to 1.204mt in October, primarily driven by stronger ore purchases. In other metals, zinc output rose 15.7% YoY to record highs of 665kt, as smelters benefited from higher fees and improved ore supply, whereas lead production decreased 2.4% YoY to 645kt for the period.

Agriculture– China buys more US soybeans
 

The USDA announced further export sales of US soybeans to China for the 2025/26 marketing year. China has bought an additional 792k tonnes of US soybeans, according to the USDA, which takes total purchases since October to a little over 1m tonnes. The pace will need to pick up if China is to buy 12m tonnes of soybeans before the end of the year. The number was mentioned by the US following talks between President Trump and President Xi. However, US soybeans are more expensive than the Brazilian supply. With estimates for another record harvest from Brazil next season, competition from Brazil will likely remain fierce.

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