The Commodities Feed: Oil in wait-and-see mode ahead of US midterms

Oil prices are likely to remain in limbo until the 3 November US midterm elections clarify the US stance toward Iran, while weakening diesel demand and ample iron ore supply weigh on parts of the commodities complex.

• Brent remained around $114/bbl after falling for a second consecutive day, with the recent rally indicating a higher perceived risk of renewed escalation in the Middle East.
• The oil risk premium could erode even without a US-Iran agreement if renewed strikes on Iran do not occur after the elections.
• The ICE gasoil crack fell toward $70/bbl, its lowest level since early October, after Russia lifted its diesel export ban following an agreement with Trump to supply more diesel to global markets.
• US crude inventories fell by about 2m barrels last week, while gasoline inventories rose by 2.3m barrels and distillate inventories increased by 420k barrels, according to API data.
• Gold recovered above $4,000/oz ahead of the Federal Reserve meeting, while copper gained as the Yangshan premium reached a record high and the LME cash-to-three-month spread moved further into backwardation.
• Iron ore fell to its lowest level in more than two years as weaker seasonal Chinese steel demand, high port inventories and rising supply reduced the prospect of a sustained recovery.

Takeaway: Investors should expect event-driven volatility in oil until the US midterms, continued support for copper from physical tightness, and persistent pressure on iron ore into year-end; gold remains focused on Federal Reserve guidance and ETF flows.