Last week was certainly a tumultuous one for Fuel Markets as we saw again major whipsaws in the price of oil as bulls and bears fought for the key 80 USD/bbl. Level on brent. Lows of 77 USD/bbl were touched, before a relief rally took prices back above 80 USD/bbl. A scenario of the temporary ceasefire between Israel and Hamas eased the geopolitical risk premiums that just a month ago took Brent to 95 USD/bbl.
Nevertheless, ongoing disagreements among OPEC members, particularly involving Nigeria and Angola seeking expanded production quotas to enhance crude sales, applied pressure to prices. Initial reports from insiders underscored these disputes, causing a dip in market sentiment. Subsequent updates, however, pointed to progress within OPEC toward resolving these differences, easing some market concerns.
UK Diesel Platts Prices found some stability, having fallen circa 11 percent since the Israel Hamas war highs. Whether or not these prices have been translated to the pumps however is once again a case for Competition and Markets authority, who are now prodding suppliers to be more transparent with their pricing. Potential solutions include forcing them to show daily price data, which, if shown to not be correlating with Platts price movements, could land them in a sticky situation.
The Week Ahead
The crucial question now revolves around whether Saudi Arabia will prolong its 1 million barrels per day supply cuts and the potential impact on prices if it opts not to do so. Additionally, the possibility of implementing even deeper cuts remains on the table.
It is also important to note that while there is an ongoing ceasefire between Israel & Hamas, it is certainly a temporary one and contingent on hostage release. Markets do not seem to be fearing this as much anymore, as we saw global equity volatility indices drop to 2020 lows. As US Traders return to the market after a two-day drop-in trading activity ahead of Thanksgiving, we could see some positioning return to the market in anticipation of OPEC’s meeting this Thursday. It’s worth bearing in mind Bank forecasts of oil prices , with many expecting a 2024 average of 90 + USD/bbl.
US GDP Data will be in focus towards the end of the week, which is often seen as an indicator of future demand of Oil & Oil producers by the world’s largest economy.