Oil commentary - 19 September 2024

Morning all. Post-APPEC. Post-Fed. Post Office head steps down. Quite the day if you’re all about all things post. Unless, of course, you’re a Fulham fan – then you hate those wretched posts after one of your two million penalties hit the darn thing on Tuesday night.

Anywayyyy, lots to talk about, including oil! Shall we? Brent is trading this morning at $73.77, up 0.12, and WTI is trading flat on the day at $70.91.

Now, where to begin? I think I’ll start with a little jam tart. No, let’s start with Powelly. And the Fed. And interest rates. A cut! The first in four years. Much anticipated, of course, but a surprise to see a cut of 50 bps with a hint of more to follow once US elections are over.

Market reaction? Honestly? None. Zilch. Nada. Zero. Nuffin. Honestly, it was like waiting for Taylor Swift to turn up and sing at your birthday party, but she cancelled and was replaced by Susan Boyle. Sorry, Susan, but I bet you’ve never been compared to market reaction to an interest rate cut before! Poor Boyley.

Back to markets, and the supposed pivot point the market has seemingly been waiting for all year (i.e., the start of interest rate cuts) was largely dismissed. I mean, yes, there was a bit of a spike at 22:00 UAE time last night, but I have a feeling that was more of a millennial getting involved in oil markets because they had never seen one of these “cuts” before, “Oooooh! Interest rates are CUT!! What does this meannnnnnn! Let’s buy ittt. Yippppeeeee!!”

Here’s the thing, though: in the last couple of weeks, we have seen Brent trade at a high of $77.63 and a low of $68.68. We have seen OPEC+ announce the postponement by two months of production returning to the market. We have seen geopolitics continue to dominate headlines, and we have largely seen Libyan oil supply dry up owing, again, sadly, to politics.

Now, let’s add the US Fed cutting interest rates by 50 bps last night (the first in four years), and you would be forgiven for assuming that oil markets would be on a tear. Not an Nvidia-style tear, but a rip, at least. Nope. Not a bit of it. I mean, yes, markets are up from the lows, but we are at the lower end of the range we’ve been in all year.

Is the demand story one that the market simply can’t shrug off? Is that the reality that is just too overwhelming for the market to ignore? Hmm, discuss at your will, but when two behemoths like OPEC+ and The Fed can’t stimulate a rally, I would argue the outlook in general is in a different place than it has been all year.

Eeyore? Is that you? Let me join you in your gloomy place.

Good day all.