Oil prices recover, fostering wheat market support

Wheat prices bounced, supported by signs of Iran war stoking importer demand, and ideas of the correlation with buoyant oil prices kicking into gear.

 

The easing in market nerves which marked the last session reversed a little on Friday, as Iran appeared to expand its hostilities geographically, notably to Azerbaijan, which said it was hit by a drone fired from Tehran, and threatened to retaliate.

 

Sirens rang too in Dubai, while Iran aimed fresh missiles at Israel and the Strait of Hormuz remained closed, provoking ideas of production shutdowns at oilfields in Kuwait and Iraq, unable to export their oil.

 

Indeed, attacks on oil tankers continued. The Iranian navy claimed to have hit a tanker in the north of Gulf, where UK authorities reported a “large explosion” in a tanker off the coast of Kuwait. The tanker Sonangol Namibe reported that its hull was breached after a blast near Iraq’s port of Khor al Zubair.

 

Revived market nerves were evident in a rise of 4.3% in the Vix “gauge of fear” index, while stock markets fell. The FTSE 100 index closed down 1.5%, and Frankfurt’s Dax by 1.6%, while New York’s S&P 500 index shed 1.2% in lunchtime deals.

 

However, energy prices gained. Brent crude added 3.6%, aiming at its first close above $84/Bbl since July 2024.

 

Dutch gas futures for May-26 gained 4.3%, albeit recouping on some of the losses registered in the last session.

 

The headway in energy markets, and ideas of a longer-lasting conflict than some investors had expected, was seen as encouraging fund interest in grains, prices of which have a firm correlation with oil.

 

Chicago soft red winter wheat, a favourite target for speculative investors, traded up 2.0% in midday deals in Chicago, for May-26 delivery, despite the headwind of a firmer dollar. The greenback - viewed as a safe haven currency, bounced by 0.5% - making dollar-denominated assets less affordable.

 

Adding support were signs of demand among importers. Jordan tendered for up to 120Kt of wheat, and Tunisia for 125Kt of soft wheat and 50Kt of durum.

 

Separately, Canada unveiled planting data showing farmers intended to seed 18.8M acres of wheat this year, a small drop year on year, and in line with investor expectations.

 

The buoyancy spread to Europe, where Paris milling wheat for May-26 closed up 1.3% at €202/t.

 

London feed wheat for May-26 settled up 1.1% at £169.90/t, a two-month closing high.

 

Rapeseed futures for May-26 gained 1.5% in Paris, closing above €500/t for the first time in eight months, supported by the headway in oil prices and Statistics Canada data showing farmers intend to lift canola area only marginally this year, to 21.8M acres.

 

The market had expected a 22.3M-acre figure.

 

Winnipeg canola for May-26 rose by 1.8%, to seven-month highs.