Oil commentary - 24 September 2024

Morning all. Tuesday. Not far from the end of September and, if you can barely believe it, nearly three-quarters of the way through the year. Gulp. Brent is trading this morning at $74.70, up 0.80, and WTi is trading up 0.90 at $71.27. What is all this talk of a 6 handle on Brent? Ha! Pfff. I take your 6 handle and throw it away. Throw it awayyyyyy. Umm, there may have been someone writing about the fact Brent was set for a new range of between $65–$70 per barrel. But he was wrong! (me).

It’s interesting though, isn’t it? Oil markets have this wonderful ability to suddenly look at themselves and say, “Oh my god! What have I done! I am wayyy too expensive, and I shall have to sell myself!!” Panic ensues, commentators get all high horsey (real word), and OPEC ministers run around wondering what to do. Except (present company excluded) that didn’t really happen, did it? Things right now in oil markets seem calm and back to where they jolly well should be, hovering around $75 per barrel, thanks very much.

Here’s the thing though: nothing fundamentally has changed. The same reasons that markets sold off a couple of weeks ago are still very much there. And now we can look back, without any APPEC dust clouding any sort of proper judgment, and see the main issue is still there from a demand point of view, and that is the flattening of demand growth emanating from China.

APPEC really highlighted that, and boy wasn’t Ebenezer Scrooge out early this year, filling each ballroom around Raffles Plaza with negative thoughts. Some, however, don’t look at things that way. The “others” don’t see tearful traders, reminiscing about the good old days when China would be there to pick up the pieces of surplus oil floating around the seven seas and save the day. No, the “others” see oil below $70 as an opportunity to buy the market because, well, simply because anything below $70 is just a bit too bloody cheap to pass up. Ahhhh, the high road.

Demand concerns parked for now, oil is doing that thing it does when it hums away to a made-up tune, closes its eyes, and puts its hands over its ears like a child refusing to acknowledge that the tooth fairy isn’t real. Brutal. Oil supply is the tooth fairy in this case, and come Q4, that surplus is very much a reality the market has to face.

Good day, and week to all.