Oil commentary - 28 September 2020

Morning all and I hope everyone had a good weekend. I say everyone, I'm sure Pep didn't. Brent is trading this morning at $41.60 down 0.32 and WTi is below the psychological $40 per bbl at $39.88 down 0.36 on the day. So, another week starts and the end of Q3 is looming. The quarter where everyone hoped we would see some normality return to everyday life. Especially the oil bulls. Alas, this hasn't transpired. I mean demand is better than where it was in Q2, but that was when nobody could leave their homes, so it doesn’t take an otolaryngologist to work that out.  What specifically though, is causing the oil market to start off in negative territory this week then? I mean, do I need to say it? There's more crude oil being produced, and demand isn't there to absorb it. That's it. I feel like I should write that on a Post-it note and stick it to my forehead. OK, let's get into some details though. According to Tanker Trackers, Iranian oil exports are at an 18-month high at 1.5 million bbls per day. That certainly wasn't part of the script for OPEC+. So that's pressuring prices. Let's chuck in a rig count increase too, shall we? Go on then. How about a pinch of Libyan oil? Sure, throw it on. Mix that all up with a dash of Novak saying that "The recovery won’t be fast; it will take quite a while before the pre-crisis levels can be reached.". Pop it in a pre-heated oven at gas mark 4 for 40 minutes and you've got yourself a a pretty awful eating cake if you're a mongoose. Brent is doing well it would seem to hang on to $40 per bbl at the moment and this is mainly on the back of other financial markets acting as belligerently as it is. I think oil fundamentals no longer need to be thrust in the face of everyone - it is clear the demand/supply balance is out of whack, however if we start seeing more evidence of increasing Covid-19 infections and poor macro-economic data then we really could be in the mid $30's before you can say Great British Oil Market Bake off. Good day.