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Fed markets jittery as Mideast conflict continues
On Wednesday, investors were hesitant to buy risky assets due to concerns over the escalating hostilities across the Middle East. This sent oil prices up and prompted investors not to purchase any new investments. Investors are becoming increasingly concerned about the possibility of a direct U.S. involvement in the Israel-Iran war as it enters its sixth day. President Donald Trump has called for Iran to surrender unconditionally and warned that the patience of the United States is wearing thin. Joseph Capurso is the head of sustainable and international economics for Commonwealth Bank of Australia. The markets are trying hard to assess the risk of a large U.S. Military intervention. The market may not be thinking clearly, but the oil and currency prices indicate that they are pricing in some risk of a very bad outcome. Brent crude futures rose 0.3% on Wednesday to $76.67 a barrel, while U.S. Crude climbed 0.43% to 75.16 per barrel. Both oil prices had increased by more than 4% the previous session. The mood was still gloomy despite the fact that the risk-off movement across the markets has slowed down. The broadest MSCI index of Asia-Pacific stocks outside Japan dropped 0.3%, as did the EuroStoxx 50 futures which fell 0.34%. DAX futures also fell 0.54% while FTSE Futures edged 0.06% upwards. After the Wall Street cash session ended in the red, Tuesday, S&P 500 Futures gained 0.12% and Nasdaq Futures added 0.17%. The dollar has dominated the gains in currencies against its counterparts. The euro was unable to recover from Tuesday's 0.7% drop and bought only $1.1501. The pound rose 0.12% to $1.3443 after a 1.1% drop in the previous session. The dollar dropped 0.2% to 144.98yen after reaching a high of one week earlier in the day. The rise in oil prices has a marginal negative impact on the yen, as Japan and the EU import a lot of energy while the United States exports it. The war has shown that the U.S. Dollar still retains a little bit of a haven status under certain circumstances, for example, when it is perceived to increase the risk of disruption of global oil supply and when it diverts the traders' attention from risks that are U.S. centric," said Thierry Witzman, global FX rates and FX strategist at Macquarie Group. FED OUTCOME The Middle East conflict, coupled with the prolonged uncertainty surrounding Trump's tariffs, and signs of fragility within the U.S. economic system, create a difficult backdrop for the Federal Reserve to make its policy decision on Wednesday. Data released on Tuesday showed that U.S. retails sales dropped by 0.9% more than expected in May. This was the largest drop in four month. The Fed is expected to maintain its current interest rates. However, the focus will be on updated central bank projections of the economy and benchmark rate. Erik Weisman is the chief economist of MFS Investment Management. He said, "We don't expect much innovation from the Fed." The new forecasts in the Summary of Economic Projection may indicate a slightly slower growth combined with a slightly higher inflation. Investors poured money into safe-haven bonds after the latest developments in Israel-Iran conflict. Bond yields are inversely related to bond prices. The benchmark 10-year rate was at 4.4067% last, after falling roughly 6 basis points the previous session. The yield on the two-year bond was 3.9582%. Spot gold was up 0.13% at $3,392.61 an ounce.
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VEGOILS- Palm rises tracking rival soyoil, crude oil
The price of palm oil in Malaysia rose on Wednesday, supported by higher soyoil prices in Dalian and Chicago, a stronger ringgit and higher crude prices. By midday, the benchmark palm oil contract on Bursa Malaysia's Derivatives Exchange for September delivery had gained 20 ringgit (0.49%) to $4,084 ringgit (US$962.30) per metric ton. Kuala Lumpur based trader stated that the market was in rangebound mode but with a bias towards the positive due to the strength of rival oils and the ringgit's weakness. The Chicago Board of Trade's (CBOT), which trades soyoil, saw a 0.75% increase. Dalian's palm oil contract and most active soyoil contract both rose by 0.66%. As palm oil competes to gain a share in the global vegetable oils industry, it tracks the price fluctuations of competing edible oils. On Wednesday, oil prices increased in Asian trade. This was a continuation of a 4% increase from the previous session due to fears that the conflict between Israel and Iran could disrupt supply. Palm oil is more attractive as a biodiesel feedstock due to the stronger crude oil futures. The Malaysian Ringgit, which is the contract currency for palm, has eased by 0.02% in relation to the U.S. Dollar, making goods denominated in ringgit more attractive for holders of foreign currencies. Intertek Testing Services, a cargo surveyor, said that exports of Malaysian products containing palm oil for the period June 1-15 were up 26.3% compared to the same period in May. AmSpec Agri Malaysia is an independent inspection company and reported shipments increasing 17.8%. According to Wang Tao, a technical analyst, palm oil is neutral between 4,072 and 4,113 ringgit a metric ton. A break in the range could indicate a direction.
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The Iran-Israel conflict is now in its sixth day, and oil prices are continuing to rise.
On Wednesday, oil prices increased in Asian trade. This was a continuation of a 4% increase from the previous session due to fears that the conflict between Israel and Iran could disrupt supply. Brent crude futures were up 26 cents or 0.3% to $76.71 per barrel at 0440 GMT. U.S. West Texas Intermediate Crude Futures increased 35 cents or 0.5% to $75.19 a barrel. The U.S. president Donald Trump called on Iran to "unconditionally surrender" Tuesday as the Iran-Israel war entered its sixth day. Three officials confirmed on Tuesday that the U.S. Military is sending more fighter planes to the region in order to strengthen its forces. Analysts say the market is primarily concerned about disruptions to the supply of oil in the Strait of Hormuz. This area carries around a fifth of all the seaborne crude oil. OPEC's second-largest oil producer, Iran, extracts about 3.3 millions barrels of crude oil per day. However spare capacity between producers of the Organization of the Petroleum Exporting Countries (OPEC) and their allies could easily cover this. "Material disruptions to Iran's export or production infrastructure would increase the upward pressure on prices." Even if all Iranian exports were lost, spare capacity from OPEC+ would be able to replace them. Brent crude oil has gained $10 per barrel in the last two weeks. Fitch analysts expect that the geopolitical premium on oil prices will be around $5 to $10. According to market sources, Brent crude’s premium over the Middle East benchmark Dubai soared to above $3 a bar on Wednesday. This was its highest level since late September 2023, according to LSEG Data. The markets are also anticipating a second session of U.S. Federal Reserve meetings on Wednesday. It is expected that the central bank will keep its overnight benchmark interest rate between 4.25% and 4.50%. Tony Sycamore is a market analyst at IG. He said that the Fed could cut rates in July by 25 basis points, earlier than what the market expects. Sycamore stated that "the situation in the Middle East may become a catalyst to the Fed sounding more dovish as it did after the Hamas attack on October 7, 2023." Low interest rates boost the economy and increase demand for oil. The Middle East conflict creates new sources of inflation, including a surge in oil prices, which makes the Fed's decision difficult.
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Small farmers are affected by China's massive feed shift to reduce soybean imports
Industry experts believe that China's plan to limit the use of soymeal as animal feed in order to reduce its dependency on imports will not only be feasible, but also costly and difficult for smaller farmers who produce one-third of the Chinese pork. China announced in April that it would lower the content of soymeal in animal feed to 10% by 2030. This is down from 13% as in 2023. The ongoing trade war between China and the United States has increased Beijing's urgency in bolstering food security. According to the Chinese agriculture ministry, soymeal made up 17.9% of animal feed in 2017. According to calculations and estimates by two analysts, China's soybean imports could be cut by 10 million tons annually, which is equivalent to the $12 billion that China spent on U.S. beans in 2024. This would reduce the demand for soybeans from U.S. farmers and Brazil, the top soybean supplier. Farmers, nutritionists and analysts say that while leading swine producers in China have reduced their soymeal usage, they can reduce it further by using other protein sources. Smaller producers, however, will likely struggle due to cost constraints and an increased sensitivity to the effects on animal growth. China is the home of half the world's pork. Matthew Nicol is a senior analyst with the research firm China Policy. He said that smallholders have a habitual preference for soymeal formulations. This is mainly due to familiarity and trust. He said that "larger firms will move faster, while smaller producers could lag behind or even suffer setbacks." In China, soybeans can be crushed to produce cooking oil or meal. This is a cheap, high-protein ingredient that's used to fatten cattle, pigs and poultry. In feed, soymeal is highly valued for its amino acid profile as well as compatibility with grains rich in energy such corn and wheat. China, the largest soybean importer in the world, has decreased its dependence on U.S. products since the trade conflict began during the first term of President Donald Trump. China purchases about 20% of its soybeans in the U.S. This is down from 41% of 2016 but it still represents nearly half of U.S. oil seed exports. SOYMEAL CUTTINGS China uses less soymeal than some other regions. In the United States, soymeal is estimated to make up 15% to 25% of hog rations. Alternative protein sources such as corn-ethanol byproducts distillers grain, and synthetic amino acids, have been used to replace soymeal at times. Basilisa Reas is the regional technical director for U.S. Soybean Export Council. According to government and company documents, the top Chinese hog breeder Muyuan Foods reduced its soymeal usage to 5.7% in 2023, from 7.3% in 2012, while Wens Foodstuff reported a soybean meal inclusion rate in compound feed of 7.4% on average in 2021. Analysts and nutritionists say that smaller Chinese producers, who raise 32% pigs in the country, 63% beef cattle, and 12% broilers, lack the technical know-how and precision feed tools needed to reduce soymeal usage. Chinese family farms use between 15% and 20% soymeal, according to data from the pig-farming platform Zhue.com.cn. Wang, a veteran pig farmer who raises 200-300 pigs in the northern Chinese province of Shanxi, uses 18% soybean meal in his sow's feed. He believes that a diet with less soymeal would reduce weight gain and lengthen production cycles. He said, "With diets high in soymeal, I can feed less." He said that if I feed low-soymeal, the pigs will become too thin. Alternatives that are expensive and underdeveloped Reas explained that soymeal substitutes are usually a mixture of protein alternatives such as palm kernel meal and rice bran or fish meal. They may also contain synthetic amino acids. China's Agriculture Ministry announced in April that it would encourage alternatives, such as synthetic amino acid, fermented hay, high-protein corn, and non-grain protein sources, including microbial proteins, insect proteins, and kitchen waste. It aims to produce non-grain proteins in excess of 10 million tons per year by 2030. China, since the first trade war of the Trump administration, has been promoting a "low-protein technology" that reduces animal reliance on soymeal by supplementing animal feeds with synthetic amino acid, particularly among large-scale companies. Muyuan is, for example, collaborating with Westlake University, Hangzhou, on synthetic biology, aiming at "zero soy" pig breeding. Industry experts have said that synthetic amino acids cannot replace the natural protein in animals and can only partially meet their digestive needs. Beijing has also planted 667,000 acres of high-protein corn. The variety has a protein content of over 10%, up from 8%. According to Guide to Chinese Poultry (a journal backed by the agriculture ministry), insect protein is also on the rise. Black soldier fly farms, located in Shandong, Guangdong, and other provinces, produce 100,000 tons of food annually. This feed is currently being used in diets for poultry, pigs, and aquaculture. The majority of alternatives are either expensive or still in the early stages of development. According to a Shanghai-based dealer, in late May soymeal cost 66 Yuan ($9.19), per unit of protein. This was cheaper than lysine (a synthetic amino-acid supplement used to balance feed) at 79 Yuan and corn protein, which costs 69 Yuan. Even Rogers Pay is an agriculture analyst with Trivium. As long as it remains the most cost-effective option for livestock and price, soymeal will maintain its market share. $1 = 7.1810 Chinese Yuan Renminbi (Reporting from Ella Cao and Naveen Thkral in Beijing; Additional reporting from Karl Plume in Chicago, Editing by Tony Munroe & Sonali Paul).
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Brent crude premium to Dubai reaches highest level since September 2023
Market sources reported that the Brent crude premium over Dubai, the Middle East benchmark, soared to $3 a barrel Wednesday. This was its highest level since late September of 2023, according to LSEG's data. Three oil brokers reported that Brent's Exchange Futures for Swaps to Dubai for August were traded on Wednesday at a premium price of $3.33 per barrel. Brokers who requested anonymity said that the overnight rise in Brent crude, coupled with a solid market structure, has kept the EFS supported during recent sessions. Brent crude closed over 4% higher Tuesday, despite the fact that major oil and gas supply and infrastructure have been spared significant impact. premium On Monday, the spread between the Brent crude first-month futures contract and that for delivery six month later was at its highest level in nearly two years. Backwardation is a market structure where near-term prices are greater than those for later dates. It reflects supply concerns. The market participants were still concerned about the possibility of disruptions to the oil supply in the Strait of Hormuz. This is the route through which one-fifth of all seaborne crude oil passes. In recent sessions, Middle Eastern crude benchmarks also gained in value. Dubai's cash-premium reached its highest level in over two months last week. Chartering costs Tankers The cost of shipping oil from the Middle East into Asia has also increased. The geopolitical risks and expectations for greater OPEC outputs are pulling apart the EFS spread, said Emril jamil, a senior analyst in the oil sector at LSEG. He added that "the widening of the gap will continue as long as tensions escalate" as this is the default situation.
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Gold prices flatten as investors remain on the sidelines before Fed decision
The gold price was flat in Asia on Wednesday, as investors held off on placing large bets before the U.S. Federal Reserve made its policy decision. They also kept a close eye on developments around the Israel-Iran dispute. As of 0341 GMT, spot gold was unchanged at $3,388.04 per ounce. U.S. Gold Futures remained largely unchanged at $3.406.50. Investors tracked the rise in risk in the Middle East. Gold fluctuated. The Fed's decision to lower rates this year is backed up by the tepid US retail sales, housing market and industrial output reports. Iran and Israel launched missile attacks on each other Wednesday, as the air conflict between the two longtime rivals entered its sixth day. This is despite the call by U.S. president Donald Trump to Iran's unconditional submission. Three U.S. officials said that the U.S. was deploying additional fighter aircraft in the Middle East, and expanding the deployment of warplanes. The data released on Tuesday shows that U.S. retails sales fell more than expected in the month of May. This was mainly due to a drop in motor vehicle sales as the rush to avoid tariff-related price increases waned. The U.S. Central Bank is expected to keep interest rates the same at the end its policy meeting, which will take place later that day. The Fed will also focus on its updated economic projections and benchmark interest rates. Goldman Sachs stated in a report that they "maintain our forecast" that central bank purchases and Fed cutbacks will boost ETF holdings and raise gold prices to $3,700/oz and $4,000/oz respectively by the end of 2025 and mid-2026. The SPDR Gold Trust is the largest gold-backed ETF in the world. Its holdings increased 0.43% on Tuesday to 945.94 tons. Palladium rose 0.3%, while platinum gained 0.3%, to $1,266.04 per ounce. (Reporting and editing by Brijesh Patel and Anmol Chaubey, Bengaluru)
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London metals edge up on dollar weakness but Middle East tensions cap the gains
London base metals prices rose on Wednesday, despite a weaker U.S. Dollar. However, tensions in the Middle East kept prices under control. The London Metal Exchange's three-month copper was up by 0.22% to $9,690.5 a metric ton at 0326 GMT. LME aluminium rose 0.18%, to $2.555 per ton. Zinc climbed 0.49 cents to $2.651.5. Lead grew 0.23%, to $1.980.5, and nickel grew 0.27%, to $14,965. Tin rose 0.73% to 32,500. Last but not least, the dollar index was a little weaker. It lost 0.13%. Dollar-denominated investments are more affordable for holders of currencies other than the dollar. Analysts at ANZ said that "base metals remained under stress amid a broader risk-off tone across the markets". Worries about the escalating violence in the Middle East were at forefront of markets on Wednesday and drove oil prices up. Oil prices are rising, which dampens economic growth and fuels inflationary pressures. Retail sales in May fell more than expected, despite President Donald Trump's changing tariff policies. The SHFE's most-traded contract for copper gained 0.14%, to 78.640 yuan (10,943.50 yuan) per metric tonne. SHFE aluminium rose 1.45% to 20,700 yuan per ton. Lead fell 0.62% to 16 820 yuan. Nickel dropped 0.49% at 118 400 yuan. Zinc gained 0.87% at 22,065 and tin increased 0.08% to 264,480 yuan. Click or to see the latest news in metals, and other related stories.
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UK Offshore Wind Industry Employs 40,000 People, New Report Finds
RenewableUK and the Offshore Wind Industry Council (OWIC) have released a new report showing that the number of people working in the offshore wind industry has risen from just over 32,000 two years ago to nearly 40,000 today – an increase of 24%.The Wind Industry Skills Intelligence Report 2025 has also revealed that the number of people working in onshore wind in the U.K. now stands at just over 15,000. This brings the UK’s total current wind industry workforce to over 55,000.The report projects future job numbers by examining three potential deployment scenarios for offshore wind in 2030, with installed capacities of 39 GW, 47 GW and 52 GW.It also includes a scenario for onshore wind of 27 GW by 2030, in line with Government targets to reach clean power within the next five years.These projections show that between 74,000 and 95,000 people will be needed to support the accelerated deployment of offshore wind by the end of the decade, while the number of jobs in onshore wind will rise to over 17,500.This means the total UK wind workforce could reach over 112,000 by 2030. The highest numbers of new jobs are expected to be created in Scotland, the east of England and in Yorkshire and the Humber.The report contains a number of recommendations to ensure that these new roles can be filled by people with the right qualifications, including the development of a national workforce strategy.This should include the creation of regional training hubs in coastal communities around the UK, with a focus on training and upskilling, including fast track approaches for new entrants and those from other sectors in the skills and roles most needed by the industry.A central workforce data observatory should be established to monitor labor supply, demand and skills gaps. Industry should work with education providers to offer apprenticeships and internship programs.The study identifies specific jobs roles where skills shortages need to be addressed to meet the demand for workers, such as high voltage cable specialist, wind turbine technician, environmental adviser, installation engineer, planning officer and technical manager.It highlights opportunities for workers in other parts of the energy sector with relevant experience such as oil and gas, or former military personnel, to retrain for these roles in renewables. The study also calls for further efforts to align STEM education (science, technology, engineering and maths) at secondary school and university levels more closely with the needs of the wind industry, with specialized modules being taught to students.The report states that the number of women working across the wind industry has continued to rise year on year since 2022 to reach 22% - the offshore wind industry has a target of 33% by 2030.The average age of people working in the industry is under 40, whereas in comparable sectors such as transport, workers are typically in their mid to late-40s, reflecting the fact that younger people are choosing careers in renewables.“This report shows that the number of people working in high quality well-paid jobs in the wind industry onshore and offshore is set to grow even higher over the next five years, well beyond the 55,000 employed today. But it also identifies a looming skills gap which we have to address by recruiting and training enough workers to take on a wide variety of new roles in renewables though technical apprenticeships and graduate training programs.“Industry and Government both have roles to play in ensuring that we enable experienced workers from other sectors with transferable skills to retrain so that they have a clear career pathway into renewables. We also need to foster young talent and inspire the next generation of engineers, designers, technicians and project managers to build the clean energy system of the future,” said Jane Cooper, RenewableUK’s Deputy Chief Executive.
Data shows that Russia's LNG imports fell 4.6% year-on-year in January to April.
LSEG released preliminary data on Monday showing that Russia's LNG exports in the first quarter of this year fell by 4.6% compared to a year ago, reaching 10.4 million metric tonnes.
Due to U.S. sanctions over the conflict in Ukraine, Russia has been unable to increase LNG exports. The new Arctic LNG 2 facility has effectively been frozen due to the Western sanctions.
U.S. president Donald Trump said that he wants the EU to purchase more U.S. LNG, and he will make it more available.
According to LSEG, Russia's exports of LNG fell by 9% in April, from 2.75 to 2.5 million tonnes compared to the same month a previous year.
In April, supplies to Europe fell 14.3%, to 1.2 millions tons, due to sanctions on transshipment that took effect in March.
Around 19% (or more) of Europe's natural gas is still imported from Russia via the TurkStream pipeline or LNG shipments. The European Union also has a nonbinding target to stop Russian fossil fuel imports before 2027.
Novatek's Yamal plant reduced total exports by 1.8% on an annual basis in April, to 1.64 millions tons. The plant's supply has been stable at 6.6 millions tons in the first four month of the year.
Sakhalin-2 (controlled by Gazprom) exported 880,000 tonnes from the Pacific Island in April. This was also fairly steady compared to the same period a year earlier.
The project's exports have increased to 3.6 millions tons from 3.5 in January-April of 2024. (Reporting and writing by Oksana Kobieva; editing by David Evans.)
(source: Reuters)