Oil commentary - 4 October 2024

Morning all and welcome to Friday. Brent is trading this morning at $77.54, down 0.08, and WTI is trading down 0.07 at $73.54. Now, where to begin? I know, a joke, to lighten the mood, ummm, ermmmm. OK, got it. Actually, not that. OK, think think think... OK! Wait! Nope. And certainly not that! Jeez, you’d get arrested, boy! I mean, I’m joking around here of course, but it is a very sad state of affairs that trying to lighten the mood by telling a joke seems a little inappropriate? It feels like we’re living through that moment when you want to tell your mates one of those jokes down the pub. You get really excited about it, “Oooh, this is going to be part of folklore.” Then you deliver the punchline and the only person who reacts is Fat Rave Dave, because he laughs at everything. “Guess you had to be there.” Brutal.

Still, oil markets need commenting on, so let’s comment away, shall we? Quite the week for Brent. On Tuesday, Brent hit a low of $69.91 and reached a high yesterday of $77.99. Reasons? Well, unless you’ve just returned from a SpaceX mission, tensions in the Middle East are on a knife edge. Yesterday, we heard this: “Biden, asked if he would support Israel striking Iran’s oil facilities, responds ‘we’re discussing that.’” Up we went, very quickly—not quite breaking through to $78, but it certainly proved the catalyst for another boost to oil prices.

On that note, I’m going to borrow from my colleague Homayoun Falakshahi, who wrote an article on this very subject titled “Israel is unlikely to hit Iranian oil export installations yet.” Here’s the opening paragraph: “Following Iran's missile response to the killing of Hezbollah leader Hassan Nasrallah and Hamas chief Ismail Haniyeh, the oil market is now grappling with the potential for further escalation and Israel's likely retaliation. While we consider an attack on oil infrastructure possible, it remains unlikely for now. However, the risk of a broader escalation in the region is becoming increasingly difficult to avoid.” Difficult to avoid. Gulp.

The market seems to be in a wait-and-see mode, with many merely waiting not for when the response may come, but for what the response may be. This has caused the rally in oil prices this week to cool off somewhat this morning, but clearly, based on the volumes traded this week, the market is ready to react, and the only button they can see is the BUY one. Eyes, as always, closely on the headlines.

Have a good, and safe, weekend.