Oil commentary - 13 August 2024

Morning all. The curtain has come down on another Olympics, and I’m not going to lie; I am pretty sad about it. Paris 2024 was fabulous. However, it is going to take me a while to get over the sheer terror of watching that bloody Madison race on the cycling track! WHAT IS ALL THAT ABOUT! At one point, I was hiding behind the sofa while I watched one cyclist whip his teammate with a strong arm to give him an extra boost! It went on for an hour!! An hour! I wouldn’t last a minute! Madison. Yeah, NAH. ANYWAY, as much as I shall miss an Olympic anecdote in this commentary, we are an oil commentary still, so let’s talk about it, shall we?

Brent is trading this morning at $81.66, down 0.64, and WTi is trading down 0.51 at $79.55. We are only just a week on from a time when oil markets and articles were talking about “The great unwind,” “Emergency rate cuts,” and “$70 is the new $80.” Pfff. Those same people are very much peeping around the curtain to see if they are allowed back in the room. Not a chance. Stay there for a few more days and think about what you said.

I mean, yes, at one point, there was a modicum of concern in oil markets, but once the drama subsided in equity markets, oil quickly followed. In fact, if anything, oil markets were actually pretty resilient, considering the carnage going on in the tech sector. The techtor. I like that.

Reality is biting, though, and eventually, those bullish demand forecasts made at the start of the year by OPEC+ had to be adjusted, and adjusted they were yesterday: “OPEC said world oil demand will rise by 2.11 million barrels per day in 2024, down from growth of 2.25 million bpd expected last month.” Much of it, they attributed to a slowdown in China. I am going to quote my colleague, Esteban Moreno Cots, who wrote this in early July: “Additionally, it is our view that China, which has been the largest contributor to diesel demand growth over the last decade, representing nearly a third of all growth, is approaching the end of its demand growth boom. Weakness in the property market is expected to constrain growth in the coming months, whilst the increased adoption of cleaner engine alternatives (such as LNG/CNG) and the potential transition of its economic model away from industrial production and exports will further dampen demand in the mid to longer term.”

So, there you go. Ahead of the curve, he says, polishing his fingernails and rubbing them on his jumper. In all seriousness, China is a story that I think we will continue to hear throughout the rest of the year. OPEC certainly has a lot to weigh up coming into the next meeting, and the market will be watching very closely if they do start to return oil from October onwards. I imagine this will lead to prices staying supported above $80 for the foreseeable. Good day and rest of the week to all.