Oil commentary - 9 January 2024
Morning all. Brent is trading this morning at $76.07 down 0.05 and WTi is trading down 0.17 at $70.60. I know what you’re all thinking “Is it right that there’s an episode where Peppa Pig and her friends are allowed to visit a zoo? Who decided on which animals weren’t allowed to be in Peppa’s circle?” No, not that but blimey Stanley, bit too much time at home over Christmas, eh? Maybe, but it’s a very interesting talking point. Anywayyy, no what you’re really thinking is “Oil seems to have started the year off terribly – why is that?”. Well, yes oil does seem to have started off the year like Arsenal, very weak, but is it surprising? When you look at it, Brent opened the year at $77.39, we’re currently trading at $76.07, so I mean, it’s not that bad at all, it’s just the perception of volatility so far this year that has made everyone assume it’s a yeah, nah for oil and all those who invest in it. Reasons Stanley, give me reasons. Well, put simply, there is too much oil it seems, this was reflected in the cuts I mentioned yesterday to Saudi OSP’s, and the market yesterday traded down to a low $75.26 before settling nearly a buck higher. The cuts to Saudi OSP’s were translated by the market as a clear and present danger that oil demand, for the early part of the year at least, isn’t as healthy as many peopled hoped it would be, cargoes need to be placed and the only seemingly achievable way to ensure that there to buy your oil is to cut prices. Hence, demand no bueno, down prices go. It’s not just crude though, and I quote my colleague Esteban Moreno Cots, who wrote a rather spending article yesterday on global diesel demand “December's Manufacturing PMI readings persist in revealing worsening industrial conditions among major manufacturers, notably impacting Europe and the US. This downturn sets a sombre tone for our demand forecasts in Q1-2024, clouding the outlook for global diesel cracks.”. I mentioned it yesterday, I mentioned it last week and I dare say that I will be mentioning it many times over the coming weeks, but the market really does seem to be focusing on economic data and implied weakness will be met with some selling across the oil barrel, in decent size as well it seems. All this right now is somewhat offset with tensions in the Red Sea, and to quote another colleague of mine, Matt Wright (I told you I was a magpie), here’s a stat for you – “Suez Canal tanker transits down 14% since first diversions”. Want to know more? Then feel free to reach out to your friendly neighbourhood Kplerian. Good day.