Oil commentary - 13 October 2023

Morning all and in our customary way, shall we say hello to Friday? All together now - Hiiiii Fridayyyyyyy! Brent is trading this morning at $87.14 up 1.14 and WTi is trading up 1.23 at $84.14. You know, it is a fickle market we work in, the oil market. Last week all the market could focus on was the demand side of the equation and the doom mongers were out in full force with headlines reading “Oil extended its slump on concerns that slowing global growth will erode consumption a day after the market posted its biggest decline in more than a year.” At the time, that was fair guidance, and fair reporting, but fast forward a week later and headlines read “Oil rises as US sanctions, stockpile forecasts raise supply worries”. I would argue that the juxtaposition of these two stories barely a week apart is a fair reflection of how oil markets are balanced right now. This commentary has spoken of the blue and the red corner, and no, I’m not referring to a Trump vs Biden Presidential election there, but that either side of the oil story right now has fair arguments. On the blue side (supply) we have OPEC+ cuts and a narrative this week from Vladimir Putin that the cuts are seemingly here to stay. Then on the red corner (demand) we have economic headwinds that continue to surface meaning demand may be impacted accordingly. Granted, this week we have seen a spike in geopolitical tensions vis-a-vis what is happening in Israel and Gaza, but whilst that has no outright impact on energy supply (some gas aside) it raises the supply side of the equation more than demand concerns do. Is $85 the support level that the market seems happy with? Even with some volatility this year Brent has been remarkably stable, something that goes against most of the economic forecasts that have been made this year. I wonder if Q4 continues to pan out with the same stability and I’d argue many others are thinking the same. Articles like this that came out this morning certainly have the red corner warming up though – “China Sept crude imports rise from a year ago as travel, manufacturing recover”. If demand continues to tick up and supply (judging by comments this week) continues to be held back, then Santa really could be bringing some gifts to every OPEC minister comes Christmas. Have a great weekend.