Oil commentary - 8 January 2025
Morning all. Brent is trading this morning at $77.59, up 0.54, and WTi is trading at a rather splendid $74.87, up 0.62.
It’s been a funny old start to the year, don’t you think? Only a week ago, most of the world was waking up a bit bleary-eyed from the night before, intent on starting their New Year with more resolutions than a Tottenham Hotspur end-of-season board meeting. Festive celebrations seem a distant memory now, but oil markets appear to have started the year with one of those springs in their step that’s usually reserved for Tigger.
Some commentators—and those who wish to share their opinion (which is encouraged, by the way)—are saying to me, “Sell it, Stan. Sell itttt.” Others are saying, “Ohh, I’m a buyer here, for sure, we’re going to the moon.” And then there are some, who shall remain unnamed, saying, “I don’t really care, mate.” Well, listen, mate, there are around 1.5 billion people with a vested interest in the price of oil and associated energy costs, so you should care. MATE. Ahem, sorry about that.
When you look at the data—which, safe to say, I do—all arrows point to an oversupplied market this year. An oversupplied market in a world facing plateauing demand. An oversupplied market in a world with an incoming US President intent on keeping that oversupplied market supplied even more. Yet oil prices don’t care. Nope, not a bit of it. This time last month, Brent was trading at $70.85. Today, they are 10% higher. And nothing has changed on the fundamentals since then. Not really.
Sure, there are those daily headlines we all read while slurping a coffee—sort of agree with—then move on to the sports section. You know the ones: “Strong dollar keeps prices in check,” or “Tight supply from OPEC members adds support to oil markets,” or my personal favourite, “A bank came in and bought a load, mate.” Love that one.
But here’s the question: are we already in a market that is ignoring fundamentals? The answer there is, when are we ever not?
Lots to ponder—maybe a bit too much for so early in the year—but it does seem like the bulls are driving us to $80 per bbl before you can say, “Cancel the meal plan delivery.” Stats later. Keep a beady eye on those, won’t you?
Good day.