Crude oil futures reversed early losses on Tuesday as market focus shifted from easing Iran-related risks to escalating tensions on the Russian-Ukrainian front. Reports that Russian President Vladimir Putin indicated stalled peace talks and threatened intensified military action, including potential missile strikes on Ukrainian cities, fueled concerns over supply disruptions.
The geopolitical shift triggered a broad rally across energy and agricultural markets. Wheat prices surged as traders weighed the impact of potential port blockades in Ukraine, compounding existing supply pressures from strong Chinese demand, tight global grain stocks, and deteriorating crop conditions in Europe. Fertilizer markets also rallied, with potash and urea prices climbing as high fertilizer costs earlier this year reduced corn planting and shifted acreage toward other grains. The biofuel sector added upward momentum, supported by tight global diesel supplies and elevated refining margins.
Ukraine’s ongoing strikes on Russian oil infrastructure and refining capacity remained a key risk factor, limiting downward pressure on diesel crack spreads despite increased traffic through the Strait of Hormuz and rising diesel flows to Asia and Europe. Analysts noted that the persistent threat to Russian energy assets continues to underpin market tightness.
In metals markets, prices of copper and aluminum showed signs of recovery after retesting historic highs earlier in the year. According to the analysis, the rebound reflected shifting expectations around U.S. Federal Reserve policy, as the anticipated aggressive rate hikes have not materialized. While further tightening remains possible, the market’s earlier fears of a severe tightening cycle have eased, providing support to industrial metals.
U.S. natural gas futures climbed to a four-week high, trading from the high-$2.80s to $2.93 per MMBtu ahead of Wednesday’s EIA storage report. The move followed forecasts of persistent late-summer heat, with more than 70 million Americans under heat alerts and temperatures expected to rebound into the 90s across the Midwest and South by Sunday. The heat wave is expected to sustain strong power demand, particularly in the so-called power-burn belt, including St. Louis, Kansas City, Cincinnati, and Texas.
Last week’s EIA data showed a modest inventory build of 16 billion cubic feet, bringing total stocks to 3,169 Bcf—approximately 6% above the five-year average and slightly below year-ago levels. Regional trends diverged, with the East and Midwest continuing to inject gas into storage while South Central salt facilities reported withdrawals. A lighter-than-expected storage build for the week ending August 21 could further tighten the market, analysts said, given steady liquefied natural gas (LNG) demand of 17.1 Bcf per day and persistent tightness in Europe.
The analysis cautioned that while the current setup supports a tradable bounce in natural gas, it does not signal the start of a new bull market. Strong production and comfortable inventory levels remain in place, but the combination of sustained heat, potential storage disappointments, and robust international demand creates conditions for a near-term upward move. A sustained close above $3.00 per MMBtu on a tight report would shift market sentiment, the analysis suggested.
