Commodities Wrap 27 July: Brent Settles 8.6 Percent Lower as War Premium Unwinds
Commodities fell broadly on Monday, led by a steep drop in oil, as a pause in US-Iran hostilities pulled the war-risk premium out of crude, per CNBC. Grains also settled lower and precious metals were mixed, with platinum and palladium the standouts, our reading.
The sharp move was in energy. Brent crude settled 8.64 percent lower at 88.42 dollars a barrel and West Texas Intermediate 7.49 percent lower at 82.62 dollars, extending a retreat that began late last week after Iran reportedly said it would halt attacks as long as the United States refrains from striking, easing nearly two weeks of conflict, per CNBC. The declines were concentrated in the geopolitical premium, our reading, as shipping through the Strait of Hormuz remained constrained. Refined products fell less, RBOB gasoline off 1.97 percent and heating oil 1.63 percent, while natural gas eased 3.62 percent.
Precious metals were mixed. Gold was little changed, up 0.18 percent to about 4,078 dollars an ounce, and silver eased 0.45 percent to 58.64 dollars, but the autocatalyst metals rallied, platinum gaining 1.53 percent and palladium 2.90 percent. Gold’s steadiness alongside the oil drop pointed to a session read as a reduction in geopolitical risk rather than a broad move out of defensive assets, our reading. In base metals, copper firmed 0.46 percent.
Agriculture was mostly lower. In the grains, soybeans fell 3.35 percent, wheat 2.95 percent and corn 2.92 percent, pressured amid the broad commodity selloff, our reading. Among the softs, cocoa dropped 4.09 percent and sugar 1.42 percent, while coffee bucked the trend with a 2.95 percent gain and cotton rose 0.93 percent.
Why it matters: The slide in oil is a double-edged signal for the Gulf, our reading, trimming the near-term export-revenue tailwind for producers while lowering the inflation and security risk that a sustained war premium would carry, provided the reported diplomatic track holds. For import-heavy economies such as Egypt, cheaper energy and softer grain prices, if sustained, would ease the external bill, our reading, a combination that landed alongside a firmer Egyptian pound, which strengthened to 50.67 per dollar.
Outlook: The near-term question is whether Brent stabilizes below 90 dollars or the war premium rebuilds if the US-Iran pause frays. Beyond energy, the markers are the Federal Reserve’s decision on Wednesday and the first reading on second-quarter US growth and the June inflation gauge on Thursday, which will shape the dollar and the demand outlook that commodity prices trade against. Markets will also watch whether shipping through the Strait of Hormuz begins to normalize, which would help signal whether Monday’s move marks the start of a broader repricing or a temporary correction, our reading.
Energy, 27 July settlement, ranked by change
| Instrument | Level | Change |
|---|---|---|
| Heating oil | $4.1124/gal | -1.63% |
| RBOB gasoline | $3.3291/gal | -1.97% |
| Natural gas | $2.767/mmBtu | -3.62% |
| WTI crude | $82.62/bbl | -7.49% |
| Brent crude | $88.42/bbl | -8.64% |
Metals, 27 July settlement, ranked by change
| Instrument | Level | Change |
|---|---|---|
| Palladium | $1,290.00/oz | +2.90% |
| Platinum | $1,628.60/oz | +1.53% |
| Copper | $6.387/lb | +0.46% |
| Gold | $4,078.30/oz | +0.18% |
| Silver | $58.64/oz | -0.45% |
Agriculture, 27 July settlement, ranked by change
| Instrument | Level | Change |
|---|---|---|
| Coffee | 323.05 cents/lb | +2.95% |
| Cotton | 80.72 cents/lb | +0.93% |
| Sugar | 14.56 cents/lb | -1.42% |
| Corn | 473.25 cents/bushel | -2.92% |
| Wheat | 658.00 cents/bushel | -2.95% |
| Soybeans | 1,211.50 cents/bushel | -3.35% |
| Cocoa | $5,156.00/ton | -4.09% |
Dollar and rates
| Instrument | Level | Change |
|---|---|---|
| US Dollar Index | 101.521 | +0.05% |
| US 10-year Treasury yield | 4.647% | -3.2 bp |
| USD/EGP | 50.67 | -1.15% |
Price basis: the energy, metals and agricultural figures are Monday 27 July front-month futures settlement-basis prices captured in the New York afternoon, with the individual contracts settling at their respective daily windows; crude is Brent and WTI for September delivery; the US dollar index, the US 10-year Treasury yield and USD/EGP are intraday levels captured at the same time.
Sources: CNBC.
