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 50Oil traders in London woke up on 26 Sep to the Dec ’24 Brent futures plummeting below $71/bbl overnight after hitting a zenith of $75/bbl on 24 Sep. Amid these sad price movements, the all-new debate gripping the oil market is whether or not OPEC+ ever decided on a $100/bbl price target for Brent. Officially, they did not. Although “new sources” claim they “unofficially” agreed on $100/bbl and have foregone it since to “take back market share”. Looking at how short the oil market is, harbouring a $100/bbl price target is a laughable thought for anyone. The consensus view holds that while demand remains abysmal, oil supply will rise in the near-to-medium term, with OPEC+ loosening its latest layer of cuts and the rising potential of Libyan oil exports returning to the market. Whether or not one agrees that OPEC+ set a price target, their cuts no longer appear to be bolstering the market, and it would not be surprising for them to want to regain some of their market share. A market share fight may be unlikely in the near term, with no one waiting to trigger further bearishness this close to their Christmas bonuses(?), but as suppliers grow and demand does not, the bear claws may inevitably come out.
