GS Weekly Commodity Thoughts Oil, Gold, Base, Gas, Gas & Ags

GS Weekly Commodity Thoughts - Oil, Gold, Base, Gas, Gas & Ags All references “we/us/our” refer to the views and observations of the desk.

Energy kept grinding higher again this week, with front Brent up another ~6%. However, worth noting the move has been almost entirely in flat price (rather than vol or spreads) which points to systematic buying and thin summer liquidity rather than any real repricing of supply risk. Gold has been well bid on steady Chinese and macro buying, which accelerated after the Treasury buy-back. In base metals, Copper led on very front-end tightness before physical deliveries into LME warehouses brought relief, while Aluminium premia came off hard on the Canadian tariff exemption headlines.

Crude → Continued to push higher this week, finishing the week up another 6%. While US- Iran rhetoric has steadily turned more hawkish, the move looks to be a function of CTA buying + low summer liquidity more than anything else. To this point, what is most striking is that the move is very isolated to flat price - Brent is up 20% from the August lows, meanwhile front vols are down around 10v from the same point and DFLs and Brent spreads remain calm - the first time we have seen this divergence since the conflict began. On the physical side, North Sea differentials have continued to weaken and window activity has been offer-heavy, meanwhile US Commercial stocks are back to the 5-year average. Though, it's worth noting the Asian buying pressure toward the end of the week seen via the rally in Dubai Crude differentials which did add some incremental support to North Sea and WTI spreads - that being said, we think China buying should moderate on higher prices.

The vol compression has been notable over the past couple of weeks; the initial phase of the vol sell-off was driven primarily by vol specialists, expressing the view that the upside had become increasingly capped following the cessation of direct kinetic action from the US. At the beginning of this week, however, the flow profile shifted - driven by directional players who had expressed delta through buying options (and consequently suffered vega losses) rolling positions down the curve into lower vega/theta structures, contributing to additional pressure on implieds. Flow over the past couple of days has been notably absent (and options volumes on exchange depressed), and the number of inbounds we have had on Crude price action reinforces the view that systematic buying is in the driving seat for flat price. Our internal CTA

model suggests CTAs are approaching max long, so we expect this buying flow to ease in the coming days.

Trade Idea – Buy Brent Nov26 $75/bbl digital put for 9.5% offer

Flat price is approaching the July highs, while vols are depressed and physical indicators suggest the market is not short of supply for now. The divergence in flat price and vols makes downside digitals look attractive

Expires 25Sep26, ref $92.6/bbl on COX6

Brent Digital Put Screener (mids)