Watch: Middle East tensions impact oil markets; record US soybean harvest expected

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This week, oil markets are focused on escalating tensions in the Middle East involving Israel and Iran, as any further hostilities could add to the disruption already felt from Red Sea tanker attacks. Despite these uncertainties, markets have remained relatively stable as the summer demand peak wanes and countries like Saudi Arabia hold significant spare capacity. Questions remain as to whether OPEC+ producers will ease their planned output cuts in October, despite tepid demand in countries like China.

Additionally, Chinese oil companies will release interim results in the coming weeks, providing insight into production targets and market outlooks amid slower economic growth and rising energy efficiency.

In refined products, August is on track to break the record for USGC-Europe diesel flows set in July. Commodities at Sea data indicates potential shipments of 13.7 million barrels, amid below-average US diesel prices and a lucrative arbitrage.

EU gas storage is likely to reach the 90% fill target set by Brussels by the end of the week, well ahead of the November 1 target. This stock build-up has been supported by a mild winter, subdued European gas demand and robust Norwegian exports. However, the fill rate may slow in September due to heavy maintenance on Norwegian fields.

In agriculture, US soybean prices are near four-year lows as the US Department of Agriculture forecasts a record harvest, increasing expected ending stocks for the 2024-25 marketing year by 29%. US farmers have expanded soybean acreage and benefitted from higher yields, while Brazil remains vulnerable to weather changes.

I’m Sophie Dyas, thank you for kicking off your Monday with S&P Global Commodity Insights.