Oil traded firmer as hopes of a US–Iran agreement ebbed, prompting a repricing of supply risk. Flows through the Strait of Hormuz have continued, yet reported August shipments from Iraq’s state oil marketing company were put at around 2m b/d; before the war, Iraq’s exports via the strait were about 3.4m b/d, implying some vessels may be transiting with transponders switched off given limited observed crossings. In refined products, middle distillates strengthened after Houthi attacks on Saudi Arabia’s 400k b/d Jazan refinery, which had already halted after an earlier strike; the ICE gasoil crack moved above $70/bbl and the restart was reported for end-August. European gas rallied as well, with TTF settling more than 9% higher to above EUR60/MWh; storage is now below 2021 levels on both a percentage and absolute basis, while the EU target of 75% ahead of winter is being tested.
In agriculture, sugar held near its highest level since October 2025 after its biggest weekly rise since 2024, with Europe’s output seen falling to a multi-year low and El Niño risks hanging over India and Thailand. Speculators cut net shorts by 34,599 lots to 77,814 lots, while gross shorts fell by 19,413 lots to 274,809 lots. Cocoa crops benefited from improved weather in Ivory Coast, Cameroon, Nigeria and Ghana, although limited sunshine in Ghana is raising black pod disease concerns. Ukraine’s Agriculture Ministry forecast 2026/27 grain exports at 38mt–40mt, about 12% below a prior 43mt estimate, citing attacks on Odesa port infrastructure and disruption to Black Sea routes.
Energy Market Strategies
We recommend that derivative traders position for continued upward pressure and heightened volatility in the crude oil market over the coming weeks. With the US-Iran deal stalling and pushing Brent crude back toward the $85-$90 range, buying near-term call options is an effective way to capture upside while limiting downside risk. Given that Iraq’s shipments through the Strait of Hormuz have dropped to just 2 million barrels per day compared to their historical 3.4 million, physical supply remains incredibly tight.
We suggest locking in long positions on ICE gasoil cracks as they surge past $70 per barrel following the drone outages at Saudi Arabia’s Jazan refinery. Historically, refinery disruptions of this scale ahead of the winter heating season lead to prolonged premium pricing. Traders should look to bull call spreads on heating oil and gasoil futures to capitalize on this seasonally tight refined product market.
In the European natural gas market, we advise maintaining a strongly bullish stance as TTF prices climb back above EUR 60 per megawatt-hour. Current European gas storage levels are lagging behind the historically low levels of August 2021, when EU inventories were only around 62% capacity. With the EU struggling to hit its modest 75% winter storage target, buying winter-delivery call options will protect against inevitable price spikes when the cold weather sets in.
Agriculture and Grain Market Opportunities
For agricultural derivatives, we see a compelling opportunity to ride the bullish momentum in sugar, which is trading at its highest level in ten months. Global supply is shrinking as European production hits multi-year lows and Indian cane output faces El Niño threats, mirroring the 2023 supply crunch that drove prices above 27 cents per pound. Traders should monitor the heavy short-covering trend, as speculators have recently slashed their net short positions by over 34,000 contracts to fuel this rally.
Finally, we believe grain traders should brace for upside breakouts in wheat and corn futures following Ukraine’s 12% export downgrade to 38 million metric tons. This drop is highly reminiscent of the export bottlenecks during the 2022 Black Sea grain crisis which sent global wheat futures soaring to record highs of over $12 per bushel. Going long on Chicago wheat futures or buying out-of-the-money call options is highly recommended to hedge against further infrastructure disruptions in Odesa.
