The Commodities Feed: Saudi Supply Uncertainty Has Oil Extending Gains

Oil prices remain firmly supported, with that floor unlikely to give way until markets get clearer visibility on Saudi supply after the East–West pipeline shutdown

Energy – Saudi supply uncertainty

Oil prices surged yesterday amid broader escalation in the Middle East and the shutdown of Saudi Arabia’s 7m b/d East-West pipeline. ICE Brent traded to an intraday high of just below $110/bbl, a level at which the market has faced tough resistance over the last 3 days. Front-month futures eventually settled a little over 1% higher on the day at $105.68/bbl, following comments from President Trump on both Iran and Russia/Ukraine. Trump posted that Iran is keen to make a deal and said he’s open to it. He also said that Russia and Ukraine have agreed to stop hitting each other’s energy infrastructure. Attacks on Russian refining infrastructure have tightened the global diesel market.

Plenty of uncertainty remains over the extent of damage and the duration of the outage for the East-West pipeline in Saudi Arabia. Prices are likely to remain well supported until we get clarity. Reports suggest the pipeline could be offline for several weeks. The Saudis have oil in storage tanks at Yanbu, which should sustain exports for several days. The risk is that port stocks run out before the pipeline resumes. Some suggest the Saudis are looking to increase exports via the Strait of Hormuz amid the pipeline outage. Given the disruptions in the Strait of Hormuz, that may be easier said than done.

Despite Trump stating that Russia and Ukraine agreed to halt hitting each other’s energy infrastructure, we’ve seen little relief in middle distillate cracks. The ICE gasoil crack remains above $80/bbl and near record levels. This suggests the market may be a bit sceptical about the agreement. Also, Russia continues to have a diesel export ban in place for now. This is set to continue until the end of this month. We could see some easing in middle distillate cracks if Russia lifts the export ban. However, that would require easing attacks on Russian refineries.

Given the tightness in diesel markets, including in the US, there’s growing noise around potential US export controls on oil and refined products. The US administration is pushing back on the idea, saying that an export ban would do little to lower prices. While a ban on refined products may offer some immediate price relief, it would weigh on refinery margins and eventually lead refiners to reduce run rates, meaning higher prices over the longer term.

European natural gas prices remain well supported, with TTF trading well above EUR80/MWh. Escalation in the Middle East is deflating hopes of any imminent pick-up in LNG flows from the Persian Gulf. This leaves the global LNG market tight and vulnerable as we edge closer towards the northern hemisphere heating season. EU gas storage is a little over 68% full, well below the seasonal 5-year average of 84%. Moves in the JKM-TTF spread suggest that Europe should be pulling in spot cargoes. Despite this, the region will struggle to hit its lower storage target of 75% ahead of winter.

Metals – Gold slips ahead of Fed, AI concerns hit copper

Gold traded lower as a sharp rise in oil fuelled inflation concerns and strengthened expectations that the Federal Reserve could deliver its first rate hike since 2023 this week. Higher Treasury yields and a firmer US dollar added to the pressure, with investors reducing exposure ahead of Wednesday's decision. Much of the hawkish Fed risk appears to be priced in. However, gold could remain vulnerable if policymakers signal rates will stay higher for longer. Persistent geopolitical risks and concerns over the economic impact of elevated energy prices should continue to provide underlying support.

In base metals, copper continued to pull back. Calls from leading technology executives to slow AI development hit tech stocks and weighed on copper, raising concerns over the outlook for data-centre investment. This added to pressure from signs of improving exchange availability, which eased some of the supply concerns that had driven prices to record highs. Rising inventories and softer nearby spreads suggest that the extreme tightness across the LME market is beginning to moderate. A stronger dollar and cautious sentiment ahead of the Fed meeting also weighed on the wider base metals complex.

In the near term, copper could remain under pressure as stretched positioning unwinds. Persistent mine-supply constraints should continue to support prices.

Agriculture – China tops half of US soybean commitment

China is estimated to have purchased nearly 13mt of US soybeans this season, exceeding half of its annual commitment of 25mt through 2028. This progress is viewed as a positive signal for US-China trade relations ahead of President Xi Jinping’s visit to Washington. In addition to soybean imports, China has committed to purchasing at least $17bn of US agricultural products, with the 2026 target adjusted on a pro-rata basis.

Ukraine’s Agriculture Ministry reported that grain and legume exports in the 2026/27 marketing season have fallen 24% year-on-year to 4.3mt as of 14 September. Corn exports nearly doubled from a year earlier to 1.8mt, while wheat shipments declined 48% YoY to 2.1mt. The overall drop in exports was driven mainly by continued Russian attacks on Black Sea trade routes.