On May 24, multiple overseas media outlets reported that the United States and Iran may soon reach a preliminary agreement. Influenced by this news, off-exchange international crude oil prices experienced a sharp decline. However, it is important to note that the tight supply situation in the crude oil market is likely to persist.
Market sentiment for crude oil has notably cooled since last week, with the main New York crude oil futures contract falling over 8% for the week. Nevertheless, with supply continuing to tighten, market concerns about inflationary pressures in the second half of the year have not eased.
**High Inflation Expectations** As expectations grew for a potential preliminary agreement between the U.S. and Iran, international crude oil prices plummeted. On May 24, the off-exchange prices for both West Texas Intermediate (WTI) and Brent crude fell by over 9% at one point, marking their largest single-day drop this year. This sharp decline in oil prices is expected to temper market bets on rising interest rates.
In fact, the market has been speculating around the U.S.-Iran deal since last week. On a weekly basis, the main WTI futures contract fell 8.2%, while the main Brent futures contract dropped 4.7%.
The new Federal Reserve Chair, appointed on May 22, has policy focuses centered on core inflation. This, combined with April's U.S. Consumer Price Index (CPI) rising 3.8% year-on-year—a nearly three-year high—and the Producer Price Index (PPI) increasing by 1.4%, the largest rise in four years, has shifted market expectations from a previous rate-cutting cycle directly to a rate-hiking cycle.
Pricing in the derivatives market shows even more volatility. CME FedWatch data on May 22 indicated the market had priced in a 60% probability of a Fed rate hike by December this year. On the same day, Nomura Securities officially withdrew its forecast for a Fed rate cut in 2026, instead predicting no rate cuts within the year.
Market opinions on the impact of a U.S.-Iran deal remain highly divided. One analyst stated that if an agreement is reached, the transmission path would likely be lower oil prices, lower inflation, and lower U.S. Treasury yields, at least alleviating short-term concerns about rate hikes. Assets highly sensitive to U.S. bond yields and previously under pressure, such as gold and non-ferrous metals, might see a rebound, though their long-term trends would depend on their respective fundamentals.
Another analyst team believes that even if an agreement is successfully reached, oil prices are likely to remain above $90 per barrel until the end of the year, meaning inflationary diffusion pressures will persist throughout the second half.
**Supply-Side Dominance Becoming a Reality** An official from the Abu Dhabi National Oil Company (ADNOC) stated that even if the U.S.-Iran conflict ended now, oil shipments through the Strait of Hormuz could not fully recover until the first or second quarter of 2027.
Public data shows that following a month-on-month decline of 7.94 million barrels per day in OPEC crude output in March, production fell again by 1.73 million barrels per day in April. Global oil inventories decreased by 129 million barrels in March and fell a further 117 million barrels in April, with an average daily inventory draw of about 4.03 million barrels. Since May, the average daily decline in global visible inventories of crude and oil products has expanded to 8.7 million barrels.
The International Energy Agency (IEA) predicts that even if geopolitical conflicts subside in the near term, the global crude oil market will remain in a state of "significant supply shortage" until October.
The issue is not limited to crude oil supply. As more resource-exporting countries tighten their export policies, market supply is facing a new round of constraints. Last week, Indonesia announced that all export sales of strategic natural resource commodities, including palm oil, coal, and ferroalloys, must be managed through a single window by state-owned enterprises designated by the government. Indonesia is the world's largest producer and seller of palm oil, the largest exporter of thermal coal, and holds significant supply capacity for nickel, a core raw material for power batteries.
An analyst noted that this move marks a major shift in the global edible oil landscape, requiring both producers and consumers to adapt to a new supply structure and price volatility. Meanwhile, heightened geopolitical tensions in the Middle East have pushed up international oil prices, strengthening demand expectations for palm oil, soybean oil, and others as biodiesel feedstocks, thereby increasing the weight of their energy-attribute pricing. Coupled with the significant lagged effects of the El Niño phenomenon and high certainty of reduced production, these factors have become core price drivers currently in focus.
**Copper Concentrate Processing Fees Hit Record Low** Amid shrinking supply of resources, difficulties in resource processing industries are becoming more pronounced, particularly in copper processing. The spot processing fee (TC) for imported copper concentrate has fallen to -$103.72 per ton (meaning smelters must pay miners to buy ore), hitting a record low, while corresponding copper prices remain near historical highs around $14,000 per ton.
According to statistics, the weekly import copper concentrate processing fee index reported -$102.84 per ton on May 15, marking the first time the index has broken below the -$100 per ton threshold. Other international market quotes showed the spot TC for copper concentrate at an extreme low of -$103.72 per ton during the same period, the lowest level since September 2007.
Against the backdrop of copper ore scarcity, miners hold pricing power. Major copper mining companies have already pushed the annual long-term contract processing fee for 2026 down to $0 per ton, setting a new historical low. The spot market has directly formed a negative TC structure, requiring smelters to pay miners for raw materials, further depressing overall processing fee levels. Spot TCs have remained in negative territory for 16 consecutive months, with the decline showing no signs of stopping.
A company stated in a recent investor interaction that copper smelting processing fees (TC/RC) continued at historically low levels in 2025, severely squeezing profit margins in the smelting segment. With the company producing little copper concentrate itself and having a low self-sufficiency rate, against the industry backdrop of tightening global copper concentrate supply, profitability in the smelting sector has been significantly compressed, leading to a periodic weakening in core business profitability.
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