Oil commentary - 7 January 2025

Morning all. Brent is trading this morning at $76.30, flat on the day, and WTI is down 0.06 at $73.50. So, you might be forgiven for thinking, "Hmm, hang on a minute, Stan, wasn’t Brent trading more or less exactly around this same level this time yesterday?" And the answer would be yes, my son, your eyes do not deceive you. (Add daughter too, but it just wouldn’t work in the scheme of the Obi-Wan persona I’m trying to convey. Second Star Wars reference of the year? Hmm. Back to oil).

I mean, blimey, talk about all this renewed hope and optimism, and here we are in another bloody rangebound market within more or less a day of proper trading! Honestly, I don’t know. Pfff. "$76 is the new $73," they will cry from the trading floors. Or trading bores.

But what’s the issue with a rangebound market? Stability is good, no? "The move in higher crude oil prices appears to be running out of momentum," says an analyst. Look, I know things have been a bit quiet, but higher oil prices? Maybe. Highest since mid-October last year, sure, but I really think the "rally" is being overdone somewhat. Wolverhampton Wanderers are on a good run of form right now, but I wouldn’t call them title contenders, would I? The same can go for oil markets. Breaking out of the $70–$75 range still looks incredibly fragile, and I’m sorry, but I’m not going to attribute much to the current rise in oil prices other than New Year optimism.

I’m not being grumpy here, far from it, but if 2024 showed us one thing, it’s that the market spent the whole year with its head in the sand, defying data when it came to real demand growth. Will 2025 prove the same? When I say "the market," I am, of course, referring as politely as possible to OPEC+ and their demand growth forecasts, which were revised down every month from August last year, once there was no alternative but to acknowledge reality.

To be fair to OPEC+, they have skin in the game and need to be optimistic—it’s their job to set the tone and protect their members' interests. But the question remains: will the market continue to trust their forecasts if they keep missing the mark?

The next OPEC report is due out next Wednesday, 17th January, and we’ll see by how much again demand growth will be revised down. I imagine the market is waiting for that report to start the year off properly, as well, of course, as US nonfarm payrolls, which are due on Friday.

Keep your eyes on the headlines like a Jedi warrior (third ref) as always. Good day.