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Summary:
- Oil opened the week with a gap higher that held through the session, as the Middle East conflict continued to threaten global energy supply.
- Saudi Arabia’s East-West pipeline remains shut after last week’s attack, with initial reports citing sources inside Saudi Arabia describing catastrophic damage to pumping infrastructure at a minimum of eight locations, and repairs expected to take considerably longer than a month due to a shortage of spare parts.
- Three industry sources told Reuters Saudi Arabia is on track to exhaust its crude export stocks within five to seven days, potentially removing around 4 million barrels per day, roughly 4% of global supply, from the market.
- Oman postponed the Persian Gulf foreign ministers meeting at which Iran had been expected to formally unveil an agreement on a temporary Hormuz shipping lane.
- Gold traded around $4,340, and the US dollar was a little stronger on the session.
- US equity index futures gapped lower and traded heavily, with analysts pointing to reports that Anthropic and OpenAI have been involved in discussions around pacing AI development as a factor weighing on sentiment.
- Japan’s Nikkei fell around 1% and South Korea’s KOSPI fell around 2%, while China’s main indexes traded mixed, with the Shanghai Composite up 0.16%, the Shenzhen Component down 0.25%, and the ChiNext down 0.47%.
- Goldman Sachs dropped its call for no change at this week’s FOMC meeting on September 15 and 16, and now expects a 25 basis point hike, which it characterises as a likely “one and done” move that should not weigh heavily on equities.
Oil opened the new trading week with a gap higher that held through the session, as the ongoing conflict in the Middle East continued to weigh on the outlook for global energy supply. The move followed confirmation that Saudi Arabia’s East-West pipeline remains shut following an attack last week, with Oman separately postponing a planned meeting of Persian Gulf foreign ministers at which Iran had been expected to formally unveil an agreement on a temporary Hormuz shipping lane.
Initial reports citing sources inside Saudi Arabia described the pipeline’s pumping infrastructure as catastrophically damaged, with at least eight locations along the pipe hit, and said repairs are expected to take considerably longer than a month given a shortage of spare parts. Three industry sources told Reuters that the outage leaves Saudi Arabia on track to exhaust its crude oil stocks available for export within five to seven days, a development that could remove around 4 million barrels per day, roughly 4% of global supply, from the market.
Further, US Energy Secretary Chris Wright warned not to bank on a breakthrough over the Strait of Hormuz, even as Iran prepares to propose a passage deal to other Gulf states. Speaking Sunday, he said it’s not a safe assumption that Iran and its neighbours will reach a consensual agreement any time soon. In the meantime, he said markets should keep relying on existing workarounds, which he estimated are still moving around 10 million barrels a day of crude and refined products.
Gold traded around $4,340 on the session, while the US dollar was a little stronger. US equity index futures gapped lower and traded heavily throughout the session, with analysts pointing in part to recent reporting that Anthropic and OpenAI have been involved in discussions around pacing the development of artificial intelligence, following public comments from executives at both companies over the weekend, as a contributing factor to the softer tone in risk assets.
Asian equity markets were mixed to weaker. Japan’s Nikkei fell around 1% and South Korea’s KOSPI declined around 2%, while mainland Chinese indexes traded more evenly, with the Shanghai Composite gaining 0.16%, the Shenzhen Component slipping 0.25%, and the ChiNext down 0.47%.
Separately, Goldman Sachs abandoned its forecast for no change in the federal funds rate at this week’s Federal Open Market Committee meeting, scheduled for September 15 and 16, and now expects a 25 basis point rate hike. The bank characterised the move as likely to be a “one and done” adjustment, adding that it does not expect the decision to weigh heavily on equity markets.
This article was written by Eamonn Sheridan at investinglive.com.
