The Fed has initiated the rate easing cycle, lowering its key overnight borrowing rate by 50 bps. To be sure, it was an aggressive start and underscored the Fed’s concerns surrounding employment, in contrast to its sanguine views on inflation. The dot plot points to another 50bp of cuts by year-end, 100bp in 2025, and 50bp in 2026. This all sounds awfully familiar to a market closer to home. Indeed, OPEC used to be called the central bank of the oil market. Like the Fed and the balance of risks that come with its dual mandate, OPEC attempts to balance the oil market. ‘Attempt’ is the key word. Will OPEC+ roll over its production cuts into 2025, and will they be phased out by the end of 2025? As of 19 Sep, Brent is above $74/bbl, after dipping its toes below $70/bbl last week. Even Grandma thought oil was oversold after reading last Friday’s ICE CFTC COT report over tea (dinner). The bearish hysteria climaxed in APPEC, but that party is over. The rate cut would surely provide a floor for oil, and as Shakira proclaimed, these Spreads Don’t Lie.
