[MARKET ANALYSIS] Crude pulls back to the benefit of metals ahead of the FOMC

WTI Oct and Brent Nov futures are softer after yesterday’s renewed rally, as some immediate supply-risk premium unwinds following a surprise 7.1mln bbl build in US private crude inventories and reports that the US military and Gulf countries have begun conducting daytime tanker transits through the Strait of Hormuz. However, the broader supply backdrop remains tight, with Saudi Arabia’s East-West pipeline remains disrupted, loadings at Yanbu were reportedly suspended, some September Saudi cargoes to European refiners were cancelled, and Libya temporarily suspended operations at three fields, although Libya’s NOC later said production and exports remain largely unaffected. US Energy Secretary Wright also expects the Saudi pipeline to resume within days, providing another source of downside at face value. WTI trades around USD 104.18/bbl within a USD 103.76-105.63/bbl range (vs yesterday’s USD 101.21-106.75/bbl range), while Brent trades around USD 107.62/bbl within a USD 107.15-108.59/bbl range (vs yesterday’s USD 105.10-109.45/bbl range). Dutch TTF flat but with prices remaining at elevated levels as the Middle East conflict continues to sustain concerns around regional energy flows and European supply security. The contract trades around EUR 80/MWh within a EUR 79.93-83.28/MWh range at the time of writing, with Europe also looking ahead to the winter period. Precious metals are firmer as the pullback in oil and Treasury yields provides some relief ahead of today’s FOMC decision, where markets lean heavily towards a 25bps hike. Spot gold has reclaimed USD 4,300/oz and trades around USD 4,334/oz within a USD 4,276-4,341/oz range, breaking above yesterday’s USD 4,317/oz high (vs yesterday’s USD 4,262-4,317/oz range). The Fed remains the key catalyst, with updated projections and Chair Warsh’s guidance set to provide the space with some impetus. Base metals are modestly firmer as risk sentiment improves and Treasury yields ease ahead of the Fed, although the fundamental backdrop remains less supportive, with this week’s Chinese activity data showing continued weakness in domestic demand despite stronger industrial production, albeit upping calls for support. 3M LME copper resides in a narrow range above USD 14k/t, currently within USD 14,074.40-14,216.15.