[MARKET ANALYSIS] Crude reverses earlier downside after Saudi attack halts pipeline; Aramco warns release relief will prove temporary

WTI Nov and Brent Dec futures have pared some of the earlier downside following fresh supply and geopolitical developments. The complex initially remained pressured by Friday’s G7 agreement to release 100mln bbls of diesel and crude from emergency reserves, Trump ruling out a US diesel export ban and Kpler data showing Middle East oil exports exceeded pre-war levels last week. OPEC+ also kept November production quotas unchanged, while Saudi Aramco surprisingly cut its OSP to Asia to a USD 5/bbl discount (exp. USD 5/bbl increase). This morning, Saudi Aramco CEO suggested release relief will be temporary while refilling global oil stockpiles could take two years. The complex caught a bid this morning after AFP sources reported that Saudi Arabia’s East-West oil pipeline halted pumping following a new attack, with “big damage” reported, while Iranian Armed Forces Chief of Staff Major General Abdollahi warned that if a new war is launched against Iran, its consequences will engulf everyone. Focus also remains in the Bab al-Mandeb Strait, after Yemeni government forces now say they have successfully taken control of Bab al-Mandab after earlier claiming to have seized Dhubab, although the Houthis deny this. WTI rebounded from a USD 89.31/bbl low towards USD 92/bbl, within a USD 89.31-91.88/bbl range, while Brent recovered from a USD 100.65/bbl low to above USD 103/bbl, within a USD 100.65-103.40/bbl range. Dutch TTF is modestly firmer in relatively contained trade and resides within a EUR 74.20-76.52/MWh range Precious metals are firmer but to varying degrees, with spot gold relatively contained within Friday’s range following post-NFP volatility, as the softer jobs report prompted markets to pare near-term Fed hike expectations, while the subsequent Dollar rebound limits upside. Spot gold trades within a USD 4,124-4,170/oz range, while spot silver outperforms within a USD 60.37-61.79/oz range. Base metals are modestly firmer as the reduction in near-term Fed hike expectations provides some support, although upside remains capped with mainland China absent for the National Day holiday and therefore little participation from the complex’s largest consumer. 3M LME copper trades within a narrow USD 14,281.83-14,388.38/t range.