Oil prices fell by 12% in two days, increasing pressure on agricultural prices

July Brent crude futures fell 8.4% to $101.5/barrel yesterday, losing 12.8% in two days after rising on Monday to another peak of $114.5/barrel. June WTI crude futures fell from $106.5 to $95/barrel (-12.1%) in two days on information about preparations for a peace deal with Iran. The market remains under the influence of conflicting statements from the US and Iran, as well as the continuation of the blockade of the Persian Gulf.

 

Trump's announced "Project Freedom" helped remove only 12 ships from the Strait of Hormuz in two days, after which it was suspended for negotiations.

 

Yesterday, Axios reported that the US is expecting Iran's response within 48 hours to a one-page memorandum of understanding to end the war, which would include the lifting of restrictions on passage through the Strait of Hormuz by both sides and the start of negotiations on Iran's refusal to develop nuclear weapons.

 

Iran says it is still considering Washington's proposal to end the war, although some US media outlets claim the two sides are close to a "14-point deal."

 

Iranian Foreign Ministry spokesman Esmail Bahaei said Tehran had not yet finalized its position and would respond through Pakistan after completing internal discussions.

 

Meanwhile, Iran's Islamic Revolutionary Guard Corps (IRGC) announced that international vessels can only safely pass through the Strait of Hormuz under new rules, and everyone must abide by the rules in exchange for safe passage.

 

The IRGC had previously announced a "zone of control" covering key sections of the strait and extending from Qeshm Island to coastal areas of the UAE, including Umm al-Quwain and Fujairah.

 

It should be noted that insider trading was again recorded - 70 minutes before Axios reported that the US and Iran were close to a "14-point" deal to end the war, that is, at 3:40 AM ET, short positions in crude oil worth ~$920 million were taken. By 7:00 AM ET, oil prices had fallen by over 12%, and these short positions in crude oil had increased in price by $125 million.

 

Expectations of an end to the war and a sharp drop in oil prices yesterday led to a sharp decline in July futures on exchanges:

• by 1.7% to $226.8/t – for soft winter SRW wheat in Chicago,
• by 2.5% to $184.4/t – for corn in Chicago,
• by 1.4% to $439/t – for soybeans in Chicago,
• by 2.7% to $1,652/t – for soybean oil,
• by 1.9% to $545/t - for canola,
• by 2.9% to $1,145/t - for palm oil in Malaysia.

 

President Trump has reiterated that the US will attack Iran with greater force if it refuses to sign the deal. However, analysts say that the strategy of slowly strangling Iran's economy by blocking exports and imports is now hitting the country harder and the ayatollah regime's ability to hold on to power amid a devaluation of the local currency and falling incomes for Iranians.