As the saying goes, what goes up must come down (unless you’re gold – another all-time high), and this past week, Brent got a quick trial of that Sweet 70 before being hurled back to the Sorrowful 60s. The escalation in attacks on Russian energy infrastructure has brought geopolitical risks and supply tightness concerns back to the forefront. However, this news was sold into just as quickly, with a worldwide oil glut a more pressing concern. In addition, the market is weighing new developments in the Israel-Gaza conflict, with Trump putting forward a 20-point plan. Hamas is yet to agree. For Brent, its walk in the (Ichimoku) cloud was fleeting as sellers quickly pressured Brent to the $65/bbl level, the lowest since June. Many banks and research houses, including us, have long predicted an oil surplus, and it may finally be materialising in the crude time spreads. Dubai crude spreads capitulated while M1 Brent/Dubai rallied above $0 since June – sweet as! As OPEC accelerates its unwinding, the market was tested as a Bloomberg headline stated its plan to raise production by 500kb/d, which OPEC promptly rejected later on the same day, in an official announcement. According to Reuters, OPEC+ delivered only 75% of its production increases between April and August, which has limited the downside to prices. It is all about narrative, and the group is hard-pressed to demonstrate unity as they campaign to ‘take back control’ of market share. Markets got a taster this week, as we discussed in the NGLs section, the LPG market was reeling from Aramco’s lower-than-expected CP settlement.
