Key facts
- China's crude oil imports are projected to fall significantly in July, down 8 million b/d year-over-year to 3 million b/d.
- US LNG exports shifted, with Egypt becoming the top destination for cargoes in May.
- The IEA warns global oil inventories could fall to critical levels before the summer demand peak.
- US Strategic Petroleum Reserve crude inventories fell by approximately 8.0 million barrels week-over-week.
- Gasoline stocks remain at their lowest level since 2014.
- US corn crop health ratings are at 67% good/excellent, the lowest since 2019.
- US soybean crop health ratings are at 66% good/excellent, the lowest since 2023.
- Heavy rainfall is expected to negatively impact the quality and yield of the US wheat crop.
- European natural gas prices have decreased, but winter supply concerns persist.
- US direct lending issuance fell 40% in the three months ended May 2026.
- Oil prices fell around 3% on hopes for a US-Iran deal and a ceasefire between Israel and Lebanon.
- Treasury yields declined, with the 10-year and 30-year yields reaching their lowest points since mid-May.
Global oil markets are undergoing significant transformations, with China's crude oil imports projected to fall sharply in July, potentially by nearly 40%, which could help cushion global prices and keep them below $100 a barrel. This decline, down 8 million barrels per day year-over-year to 3 million barrels per day, influences shifting global energy trade dynamics. Concurrently, US liquefied natural gas (LNG) exports have seen a shift, with Egypt emerging as the top destination in May as Europe's share decreased. The International Energy Agency (IEA) has issued a warning that global oil inventories risk declining to critical levels before the summer demand peak, a situation that could persist for months even if geopolitical tensions ease. This market fragility is underscored by significant inventory draws; US Strategic Petroleum Reserve (SPR) crude inventories decreased by approximately 8.0 million barrels week-over-week, totaling 357.1 million barrels, with sour crude down 5.4 million barrels and sweet crude down 2.6 million barrels. The total crude draw for the week was 16.15 million barrels. Crude inventories continue to fall, with Cushing nearing tank bottoms, and gasoline stocks remain at their lowest level since 2014 despite a recent build. OPEC+ is set to relax its output targets to adjust production levels in response to market dynamics, following a period where OPEC crude output hit a 37-year low. Tanker traffic has partially recovered to an estimated 60-70% of pre-war levels, indicating a more fragmented shipping environment, with Iranian exports reportedly decreasing by approximately 90%. Oil prices have shown volatility, falling around 3% on hopes for a US-Iran deal and a ceasefire between Israel and Lebanon, which raised expectations for the reopening of the Strait of Hormuz. However, prices stabilized as Oman reported normal operations at its Mina al Fahal port, with Brent crude for August delivery rising to $95.36 a barrel, supported by optimism surrounding peace talks. Aberdeen Investments noted a 0.72% drop in Brent crude prices to $94.30 per barrel. The discount on Western Canada Select crude oil has narrowed, impacting the pricing differential with lighter benchmarks. Glencore has sold WTI Midland crude to Total and Moeve. Japan's crude oil imports hit a record low in April, falling 65.7% year-on-year, and the country is increasingly relying on US crude supplies. India's refined product exports have reached their lowest point since October 2022, driven by domestic energy security concerns, and the country has restored its crude inventory buffers. European gas prices have decreased, but winter supply risks persist due to low storage levels, limited Russian pipeline gas, and Norway operating at maximum capacity. California natural gas prices hit historic lows in early 2026, while US natural gas spot prices at Waha and the Permian Basin have turned negative since February 5, indicating regional oversupply. US natural gas futures declined due to lower LNG export flows to terminals along the US Gulf Coast, concentrated at Sabine Pass LNG and Corpus Christi LNG. LNG feedgas demand is projected to fall by 0.6 BCF/d to 16.2 BCF/d, though this is still an increase compared to 2025 levels. US diesel futures are approaching a 52-week high. In agriculture, US corn crop health ratings are at 67% good/excellent, the lowest since 2019, and soybean ratings are at 66% good/excellent, the lowest since 2023. Spring wheat ratings also declined. Heavy rainfall during harvest is expected to negatively impact the quality and yield of the US wheat crop, which experienced minimal moisture during its growing cycle. CBOT wheat futures declined due to favorable US crop weather and ample global supplies. US corn export inspections are projected at 1.90 million metric tons next week, with soybean export inspections potentially down 16%. Brazil's Safrinha corn yields are expected to increase due to crop-finishing rainfall. Farmer sentiment weakened in May, with the Purdue/CME Ag Economy Barometer falling to 119, driven by a drop in the Current Conditions Index. Nitrogen fertilizer prices continue to fall, with urea futures showing a notable drop since the start of the year. The Ulster Farmers' Union states that beef processors have cut prices too aggressively, pushing family farm businesses into an unsustainable position. In the financial sector, US direct lending issuance fell 40% in the three months ended May 2026, with private equity-backed loan volume down 37%. Investor commitments to private credit funds remain below 2023 peaks, and May flows dropped 35% month-on-month amid concerns over loan quality and competition. Software companies have been supplanted as the leading sector in the leveraged loan market. Treasury yields declined, with the 10-year and 30-year yields reaching their lowest points since mid-May. US retailers may face challenges as rising gas prices and economic strain reduce consumer spending power, with consumers prioritizing essentials. Used construction equipment inventories decreased in May, while rental demand remains strong. The US has reduced tariffs on farm and industrial equipment to ease financial pressures. Houston's waterborne tonnage rose 12% year-over-year to 65 million short tons in Q1 2026, driven by a 19% increase in exports. European steel exports to the U.S. decreased by 34% following a U.S. tariff hike to 50%. Americas Styrenics is idling its California plant. ICIS has acquired the AMI Plastics Market Intelligence Dataset to enhance its insights into global polymer demand. Japan's Prime Minister stated that the country's petrochemical supply is expected to last beyond the fiscal year. Dry bulk Capesize and Panamax rates decreased, while VLCC tanker rates increased. The ongoing slump in manufacturing-facility construction is trivial compared with the data-center buildout. Moody's chief economist Mark Zandi highlights concerns over stalled real wage growth and rising inflation driven by fuel costs from the Iran war. Braskem SA is seeking creditor support for an out-of-court debt restructuring. BMO has issued a recap of the chemical sector. The US week 2-4 weather outlook predicts cooler temperatures, with exceptions in California and Texas.