Aluminum Squeeze Might Get Worse Yet -- Commodities Roundup

MARKET MOVEMENTS:

--Brent crude oil is down 0.9% to $91.86 a barrel.

--European benchmark gas is up 0.9% to 47.39 euros a megawatt-hour.

--Copper futures are down 0.9% to $13,614.50 a metric ton.

--Gold futures are up 0.6% to $4,559.10 a troy ounce.

TOP STORY:

Aluminum Squeeze Might Get Worse Yet

Aluminum--used in everything from Ford F-150 trucks to soda cans--hasn't risen in price as much as crude oil, liquefied natural gas or fertilizer since the Middle East conflict began.

Some industry experts warn aluminum's rally is far from done.

To understand why, look at the material that smelters retain to ensure operations run smoothly. Many had a buffer that could see them through weeks of disruption.

But the Strait of Hormuz closure means those stockpiles have likely been run down. Smelters are trucking in raw materials to keep operating, but analysts say that can't match the volume of alumina and other products that typically come in via the waterway.

OTHER STORIES:

China's EV Sector Stalls as Stimulus Taper Amplifies Demand Downturn

China's electric-vehicle makers got off to a rocky start this year as fading government support and softer demand weighed on the world's largest auto market.

Major players including BYD, Li Auto and XPeng all reported weaker profitability for the first three months of the year, underscoring the mounting pressure facing the sector after years of subsidy-fueled growth and intense price competition.

MARKET TALKS:

Oil Stockpiling Efforts Seen Supporting Crude Prices -- Market Talk

1420 GMT - Efforts to rebuild depleted oil inventories and expand strategic reserves are expected to support future oil demand, limiting the downside for crude prices even if the U.S. and Iran eventually reach a peace agreement. Capital Economics estimates that replenishing strategic reserves among International Energy Agency members, new stockpiling initiatives aimed at improving energy security, and a return to China's previous pace of stockpiling could add between 950 million and 1.2 billion barrels a day of additional demand over several years. "Even though this is not actual consumption of oil, additional demand will be supportive for oil prices and perhaps prevent prices from falling back as far as they would otherwise," says Kieran Tompkins, economist at the firm. ([e-mail])

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Oil Continues Lower on Hopes for U.S.-Iran Agreement -- Market Talk

1015 ET - Oil futures extend their decline on expectations that an agreement to open the Strait of Hormuz could come anytime soon. "With a peace deal in the making, ideas that more oil traffic will be moving through the strait into the weekend is keeping pressure on oil prices," Dennis Kissler of BOK Financial says in a note. "While tighter global crude supplies remain, the fear of tighter for longer is continuing to be taken out of the price curves." WTI is down 1.7% at $87.40 a barrel and Brent is 1.7% lower at $92.12 ahead of today's July contract expiry. ([e-mail])

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U.S. Natural Gas Futures Extend Rally -- Market Talk

0921 ET - U.S. natural gas futures are rising for a third session with weather forecasts adding some cooling demand for early June. Yesterday's report of a 92 Bcf storage injection was "mildly supportive," while LNG feedgas flows are set to increase following maintenance at several terminals, Eli Rubin of EBW Analytics says in a note. The move looks mostly seasonal with near-term resistance at $3.35, although "chances for a wider short-covering event cannot be ruled out--particularly if mid-June forecasts continue to warm or Cameron LNG returns over the weekend," he adds. Nymex natural gas is up 2.1% at $3.352/mmBtu. ([e-mail])

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Logistics a Big Hurdle for Oil Markets to Get Back to Normal -- Market Talk

0910 ET - Oil markets are reflecting growing conviction that a deal to end the U.S.-Iran conflict is close, although logistics remain a major hurdle for a return to normal, says Ajay Parmar of energy intelligence firm ICIS. If a deal is reached tomorrow or in the next two weeks, "our expectation is that oil markets as a whole and petrochemical markets all the way along the chain will not reach some level of normality until early next year," he says. Ships lining up to load oil in the Persian Gulf will all want to go in at the same time, and with producers eager to unload their full storage tanks, large vessels are likely to go to the front of the queue, he adds. "There will be a scramble at the beginning, but there will have to be order very quickly."([e-mail])

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China Drawing Stocks Pushes Back Oil Market Crunch -- Market Talk

1118 GMT - China's supply and demand balances suggest Beijing is drawing down oil inventories, delaying a broader oil market crunch into the third quarter. "Month-to-date estimates of China's crude imports and refinery runs suggest that refiners in China have been much more reliant on tapping inventories in May compared to April," Hamad Hussain from Capital Economics says. Despite weaker crude imports and lower refinery runs, underlying oil demand in China has remained relatively resilient, suggesting commercial inventories are being used to bridge the gap between supply and consumption. "If China's demand for crude in May were to be repeated in June, the 'tipping point' in the global oil market could be pushed back from June and into July," the economist says. ([e-mail])

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Iran Seen Holding Hormuz Leverage During Nuclear Talks -- Market Talk

1103 GMT - Iran is unlikely to give up control over the Strait of Hormuz, as the waterway remains a key source of strategic leverage in any future nuclear negotiations with Washington, says Bjarne Schieldrop from SEB Research. "The likely path out of this war has for quite some time now been a deal which is essentially not a deal, but rather an agreement to talk further and to resolve contentious issues later," the chief commodity analyst says. "Basically kicking the can down the road." ([e-mail])

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Oil Extends Losses on U.S.-Iran Deal Prospects -- Market Talk

1059 GMT - Oil prices extend losses on optimism over a U.S.-Iran agreement that would gradually reopen the Strait of Hormuz, though market watchers say it will take months to fully normalize crude production and flows. "While significant hurdles remain, the market is reacting to the prospect of a supply surge once hundreds of tankers loaded with crude oil and refined fuels are released from the Persian Gulf," analysts at Saxo Bank say. "In the months ahead, however, demand to replenish depleted global inventories is likely to provide support, potentially lifting the price floor compared with pre-war levels." Brent is down 1.7% to $92.09 a barrel, while WTI futures fall 2% to $87.16 a barrel. Both benchmarks are on track for a weekly loss of more than 10%. ([e-mail])

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Palm Oil Prices Edge Higher, Near-Term Trajectory Appears Bullish -- Market Talk

1028 GMT - Palm oil prices closed flat, while the medium-term palm oil setup is becoming stronger, says Abdul Hameed, director of sales at Pakistan-based Manzoor Trading. The combination of sovereign liquidity support, B50 acceleration and persistent weakness in the rupiah is building a bullish foundation heading into 3Q, he adds. The Bursa Malaysia Derivatives contract for August delivery closed 2 ringgit higher at 4,535 ringgit a ton. ([e-mail]; @ivy_jiahuihuang)

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Gold Rises as U.S., Iran Near Deal, Easing Inflation Concerns -- Market Talk

0801 GMT - Gold prices rise on news that the U.S. and Iran are within reach of a 60-day agreement that would reopen the Strait of Hormuz. In early trading, futures in New York rise 0.5% to $4,554.40 a troy ounce and are on track for a modest weekly gain of 0.7%. "The easing of energy-driven inflation concerns helped push bond yields and the dollar lower, providing support to bullion," analysts at Saxo Bank say. Still, "gold remains caught in a challenging technical environment." Meanwhile, the Federal Reserve's preferred gauge of monthly price increases grew at a slower pace in April but remained above its target rate. ([e-mail])

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Gold's Recent Weakness Doesn't Suggest Breakdown in Role as Safe Haven -- Market Talk

0756 GMT - Gold's recent weakness doesn't suggest a breakdown in its role as a safe haven, says OCBC's Afdhal Rahman in commentary. Instead, the decline seems largely macro-driven, as rising oil prices from the Middle East conflict push inflation and real yields higher, boosting the dollar and capping gold's gains, he says. While near-term headwinds could persist, the long-term case for the yellow metal appears intact thanks to central bank buying, reserve diversification and geopolitical hedging, says the executive director for wealth advisory. Investors should continue holding gold as part of a broader, well-diversified portfolio. Bank of Singapore research suggests the optimal exposure to be around 4%. Spot gold rises 0.6% to $4,523.33 a troy ounce. ([e-mail])

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Comex Gold Futures Likely Staging Counter-Trend Rebound -- Market Talk

0628 GMT - Comex gold futures are likely staging a counter-trend rebound, based on the daily chart, RHB Retail Research's Aiman Kamil Bin Ahmad Shauqi says in a research report. The futures paused their downtrend on Thursday and selling pressure has tapered off, the analyst notes. However, the futures are still trading below the 20-day and 50-day simple moving averages and relative strength index remains below the 50% threshold, the analyst says. Based on the bearish technical setup, the commodity's rebound will probably be short-lived and followed by downside price action. Immediate resistance is pegged at $4,650 per ounce, while initial support is at $4,400 per ounce, the analyst adds. Spot gold is 0.5% higher at $4,519.46 per ounce. ([e-mail])

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Iron Ore Rises as Supply Declines -- Market Talk

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05-29-26 1053ET