Oil commentary - 21 February 2024
Morning all, Wednesday, welcome to it. Brent is trading this morning at $82.62 up 0.28 and WTi is up 0.24 at $77.28. Yesterday was the first trading day for a while where I would say everyone was “back”, what with Lunar New Year last week, President’s Day in the US on Monday and everyone else on half term which left a lot of people asking the valid question, “haven’t we just LITERALLY had Christmas?”. Fair point. What did this all mean for energy markets though? A big hurrah? Ermm, yeah, nah. Brent opened at $83.24 before settling down to $82.34. No bueno. I ask you this my fellow oily friends, is $82.50 just a nice kind of number to dance around seeing as, once again, things from an energy point of view seem pretty ambiguous? What do I mean by that? Well, most of 2024 saw us really flirting around $78.50 on Brent. The situation in the Red Sea deteriorated and I would say another 4-6 bucks a barrel of risk premium was priced in, hence $82.50, around there anyway. What’s the next move though? (Lots of questions today, Stanley? Is that another question? Hmm, could go on a while this) Here’s the kicker in my opinion and the reason energy prices seem to be moving in waves - higher for longer interest rates have caught markets off guard, many people saw rate cuts starting at some point in Q1 and there’s about as much hope of that as there is me sticking to my No Carbs diet. Indeed “U.S. inflation data last week pushed back expectations for an imminent start to the Fed's easing cycle, with economists polled by Reuters now forecasting a cut in June.”. This is keeping a lid on how much money is flowing into oil, and keeping markets range bound, albeit a higher range, but a range, nonetheless. Let’s face it, if markets were to look at demand data coming in from China which showed China air passengers in Jan 2024 surpass 2019 levels, then one could be forgiven for thinking a jump up in prices would be justified, couple that with an ever deteriorating situation in the Red Sea and the argument about supply/demand fundamentals versus fiscal policy watchers is more evident than ever. Now, where’s my bagel, I mean banana. Good day.