Crude oil dropped, with settlements hovering near $100 a barrel, as signs emerged that Saudi Arabia is boosting exports through the Strait of Hormuz while fresh hopes arose for diplomatic progress on the Iran conflict. Copper extended its upward move on indications of tightening supply. Gold declined as investors weighed the risk of further interest rate hikes from the Federal Reserve.
Oil
Oil fell, settling close to $100 a barrel, amid signals that Saudi Arabia is increasing shipments via the Strait of Hormuz and renewed optimism over potential diplomatic breakthroughs regarding the war with Iran. Global benchmark Brent crude declined for a fourth consecutive session, settling 3.4% lower. The October WTI contract, which expired Tuesday, dropped about 4.5%. Satellite data showed a surge in Saudi oil loadings observed in the Persian Gulf over the weekend, with the number of vessels spotted at the kingdom's main Gulf port reaching its highest level since June. Imagery indicated that the country successfully redirected export routes back to the Gulf after a key east-west pipeline was shut down due to a drone attack.
Energy infrastructure is increasingly becoming a target in the conflict. Ukraine has also been striking Russian refineries, fueling investor concerns that repairs and a full return to normal operations could take considerable time, whether in the Middle East or Europe. The Trump administration proposed investing $5 billion in a new fund to help Middle Eastern nations rebuild energy infrastructure damaged during the war with Iran. Meanwhile, President Trump told Fox News he would "possibly" be open to meeting with Iranian President Masoud Pezeshkian during the UN General Assembly in New York this week, as Washington seeks to intensify pressure on Iran's trading partners.
Oil prices have climbed more than 65% this year, with diesel remaining the focal point of global fuel shortages. US diesel prices at the pump hit a fresh record, exceeding $6.50 per gallon. The surge in energy costs driven by the war has reignited global inflation worries and put pressure on Trump's Republican Party ahead of the midterm elections. Diesel futures settled about 3% lower on Monday. Admiral Brad Cooper, commander of US Central Command, said that crude and LNG flows through the Strait of Hormuz over the past two weeks rose to a six-month high. The UK Maritime Trade Operations office reported that between September 17 and 19, an average of roughly 32 vessels per day passed through the strait with US assistance.
"The market's focus has shifted to improving oil and LNG flows through the Strait of Hormuz and the potential for diplomatic progress during the UN General Assembly," said Arne Lohmann Rasmussen, chief analyst at A/S Global Risk Management. "The most severe pressure on crude may be easing." However, supply risks in the Middle East remain. An air raid siren sounded in Saudi Arabia's capital Riyadh over the weekend, the first such alert there since the most intense phase of the US-Iran war in March and April, with warnings also issued in places like Yanbu on the Red Sea coast. The kingdom continues to face threats from Yemen's Iran-backed Houthi forces.
WTI for October delivery fell 4.5% to $95.78 a barrel, while Brent for November settlement slid 3.4% to $100.34 a barrel.
Base Metals
Copper prices extended gains, again approaching the record highs hit earlier this month, supported by rising equities and signs of tighter supply. London copper recorded its 11th weekly advance in 12 weeks last Friday. On Monday, copper rose as falling oil prices and market optimism buoyed stock markets. According to Shanghai Metals Market, several copper smelters are scheduled for planned maintenance in October and November, which will limit any significant increase in supply. At the close, LME copper added 1% to $14,661 per metric ton; LME aluminum slipped 0.7% to $3,267 per ton; LME nickel gained 0.8% to $16,318 per ton; LME zinc rose 0.2% to $3,926.50 per ton; LME tin advanced 0.5% to $53,944 per ton; and LME lead climbed 0.8% to $1,936.50 per ton.
Precious Metals
Gold fell as investors weighed the possibility of additional rate hikes from the Federal Reserve. Bullion slipped as much as 1.3%, dropping below $4,325 an ounce at one point. Following the Fed's unanimous decision to raise rates last week, several policymakers are scheduled to speak publicly this week. Chicago Fed President Austan Goolsbee warned that the central bank cannot ignore repeated and prolonged supply shocks, and that responding to them could inflict economic pain. Traders noted heavy selling pressure in the London gold fixing auction, where the volume of gold sellers sought to offload was four times the amount buyers intended to purchase, pushing prices lower. As of 6:26 p.m. Eastern Time, spot gold was down 0.8% at $4,343.43 an ounce, while spot silver fell 0.3% to $66.034 an ounce.