There have been a lot of nothingburgers in the oil market lately, and Brent’s price action is experiencing increased exhaustion. Over the past week, it fluctuated between the $65-68/bbl level. In a bid for market share, OPEC+ agreed to raise oil production further from October last weekend, unwinding its second tranche of cuts of 1.65mb/d in place since April 2023. The market largely expected this, and prices actually rallied on Monday’s market open. OPEC may have come out of Summer’25 relatively unscathed, but Q4 will be a different beast. There may be widespread expectation of an oil glut from Q4, but can China maintain its gluttony for oil? This was a fundamental question surrounding APPEC discussions in Singapore this week. Geopolitical tensions in recent years, expressed through resource nationalism, protectionist trade measures, and using energy as leverage, have elevated energy security as a central concern. With balances expected to tighten from 2027, to this end, Beijing’s actions are rational, stockpiling crude at lower prices. Speaking of tensions, the geopolitical temperature was raised in Eastern Europe and the Middle East this week, with a Russian drone incursion into Poland and an Israeli strike targeting Hamas leadership in Qatar. This is not enough to budge Brent. Prices are trending in a symmetrical triangle pattern, through a series of successive lower highs and higher lows. There is simultaneously indecision and potential for a significant breakout in either direction. Watch this space.
