Oil commentary - 29 October 2024

Morning all. Chewssssday. Two days in a row as well? Blimey. Yep, your eyes do not deceive you. Let’s have a look at all things oily, shall we? Brent is trading… wait, rubs eyes, opens them widely… Brent is trading this morning at $71.33. But to be honest, that’s December Brent, which expires in two days, so we really need to be talking about January, ha! Wow, yeah—two commentaries in two days, and he’s waffling. Oh, shut up and get on with it, Stanley!

January Brent is trading this morning at $70.85, down 0.15, and WTi is at a coffee-spluttering $67.24, down 0.14. It’s been one of those years, really, hasn’t it? Not one of those years where you break your New Year’s resolutions around mid-January—that’s every year. No, it’s one of those years in oil markets where something dramatic happens, then there’s a lull. But you sense it’s not over? Like there’s more to come, but you’re scrambling around trying to figure out what exactly that might be. A bit like trying to tell someone something really important while you’re brushing your teeth: “iidd you owwwww, Ilad Iaaan may ack aaaan!” “What?” “I edddd.” And so on. You’re doing it now, aren’t you? Stop it.

But seriously, I mentioned yesterday the “Pendulum of Premium”—did we see all that risk premium wiped out yesterday? (Just FYI, both Brent and WTi dropped around 6% yesterday. A similar drop was seen in May and October 2023, so while it’s dramatic, it’s not mind-bending. Nothing like trying to talk properly while brushing your teeth; now that’s mad).

I mentioned that right now, Brent doesn’t have a lot of reasons to stay supported (geopolitical tensions easing, demand weaker than forecast, more oil online, etc.), and a breakdown through $70 is highly likely. The question will be what OPEC+ does because, right now, any supply concerns—if there were any—have been priced out, and come December, more supply is scheduled to return from the group. Anything below $70 today, and you can expect a headline from an OPEC minister or two quicker than you can say, “But I don’t want to go trick-or-treatinggggg.”

Eyes on the headlines, as always. Good day.