How low can Joe go?

Another difficult week passes into history.

With just 21 days of 2023 left it may be safe to say we won’t see $100 a barrel Brent this year as so many traders, banks, economists and hedge funds who put their money down to back their frequent forecasts, said we would, especially during those heady weeks of September when ICE Brent spun around $97 a barrel prompting one expert to call with huge confidence “$100 a barrel Brent by Halloween”.

We should add “note to self” for 2024 reading “It always rains in September” and “Halloween always brings the unwelcome and unexpected… and it’s never pretty”.

Much of what has taken place in the Oil markets in the 4th quarter of this year few saw coming.

Opec+ did everything to guide us not to be stupid enough to short sell a market they were ready to strangle but even their bet on $100+ oil fell into a whole heap of uncertainty especially when they metaphorically chased their losses by cutting their oil production again and again but still couldn’t influence market sentiment.

During recent weeks they have had a stab at various crude oil production cut figures meant to scare oil markets into buying.

Even this week a 1 million barrels a day cut announced at the recent meeting suddenly and rather dazzlingly turned into a cut of 2.2 million barrels. It’s frustrating none of us are working from the same abacus as the Saudi oil minister, if they can’t see how to cut the cake it’s not impossible they might consider taking the whole cake, now that would be an unexpected game changer.

However, whatever OPEC+ does ?it seems they are butting up against the force that lives outside of fort opec….. that funny little space called the oil market.?

Perversely the EU also tried to alter the natural flows of the market by applying price caps and sanctions which were designed to cut off Russian supply to Europe to ring fence the Russian war chest, but what actually happened is Russia found outlets for their oil in many new regions, and a way to create a supplementary shipping market, which just 19 months ago seemed impossible. That cannot have helped OPEC’s management of their supply or the EU’s doomed strategy.?

In essence both have tried to divert supply and prices to their advantage and so far both have been left floundering.?

We don’t apologise for repeating our well worn but reliable phrase …”Nobody is bigger than the market”

A Financial Times columnist Alan Beattie recently summed up the whole problem beautifully when he wrote??“Governments cannot muster enough control over global demand to choke off trade, supply chains are agile, sometimes illicitly so, and end users have found alternatives”.

”Indeed, as the questionable success of U.S. sanctions on Iran and Venezuela, and now broader Western sanctions on Russia have shown, sanctions rarely achieve the goals they were imposed to achieve. There has been no regime change in either Venezuela or Iran, Russia has not stopped fighting Ukraine, and oil has continued flowing from all three countries”, despite numerous attempts by Saudi Arabia to offset renegade?supply by cutting their own production.

And this is what OPEC+ in part are up against, ironic when you consider Russia is one of two heads of OPEC + together with Saudi Arabia, so there sits another?major risk hiding in plain sight.

There can be little doubt oil’s price?sell off could boost the chances that opec+ may call yet another emergency meeting within the next few weeks, according to Citigroup Inc.

The so called ?“badly behaved” market has been "very disappointed" with the group's latest set of measures, which came against a weakening backdrop, the bank's analysts said in a note.

Meanwhile?OPEC's top official has urged member countries in a letter to reject any agreements that target fossil fuels at the latest climate negotiations.

Producers should "proactively reject any text or formula that targets energy" in the form of "fossil fuels rather than emissions," Secretary-General Haitham Al

Ghais said in the letter to OPEC's 13 members.

Wherever we look OPEC and OPEC+ look under pressure and certainly have their plate full.

However, there is a tickle of?good news for OPEC and that came on Friday as America announced?monthly tenders to buy oil for its strategic petroleum reserve starting in February and March ?2024.

Their tenders are expected go on until at least May as the Biden administration moves ahead with plans to refill the caverns that currently sit near the lowest levels in 40 years.

Timing is everything and their timing is poor.

They had opec on the ropes and have now in theory put a floor in the market for the first half of 2024.?

However, maybe they had little choice,

The?problem is that having eliminated roughly half of the US strategic petroleum reserve during a time when China has tactically built up its own energy security to over 1?billion?barrels leaving the?US not only exposed to any true emergency but also vulnerable to a collapse of the salt caverns which hold the SPR and which have not been this empty since the 1980s.

It's also a reason why there has been heavy pressure on Joe Biden to at least?start?refilling the SPR.

Friday saw Biden's DOE finally began to address the problem and?issued that tender?for 3 million barrels to begin replenishing the Strategic Petroleum Reserve?….the small print read “By US flag vessels only”….oh boy let’s make it even more difficult!!

Just to add to the mix US crude production has soared to record levels to just above 13 million barrels a day, as shale explorers are re invigorated by the support OPEC+ gave to prices earlier this year.

In summary, we have a?struggling OPEC, and an EU not really achieving what they set out to do. In all this Russia is creating new ways to move oil around the Globe and America are achieving record crude oil production?….?

So America has record crude oil production much of which they are exporting, and to add to the confusion?America is tendering to buy crude oil (albeit sour crude) and on U.S. flag ships?

Hmm…..I think I have an idea !!?

This week’s closing guide prices:?

ICE Brent 75.84 (-2.29)

WTI 71.23 (-2.12)

ICE gas oil 774.00 (-6.50)

Euro Mogas swaps 704.00 (-18.00)

Euro naphtha swaps 614.00 (-15.00)

Nymex gasoline 2.0498 (-3.87 cents a gallon)

LPG swaps 498.00 (-14.00)

Opec basket 78.31

Credit: Robert Haynes - Silvergreen Energy