After the wild ructions of late August when, under cover of a public holiday in London, Brent shifted up and then down in ranges of 10pc a day for two days, September brought a relatively becalmed crude price.
Front-month Brent was around $51/bl on 1 September. It closed out on the final trading day of the month at around $48/bl having not left this tight range for very long all month. While this kind of stability isn’t exactly welcomed by producers, there has at least been a grizzled acceptance of the situation. You know where you are with consistently priced crude.
But if past performance is any indication of what’s to come, then something’s brewing. Brent also held in a $4/bl range between April and June before resuming the downward path that began in mid-2014. So, what next?
The position of Opec has become entrenched, despite the organisation’s internal marker — the daily basket price — remaining below $50/bl for two consecutive months for the first time since 2009.
There is no sign that the policy of defending market share and to hell with the price consequences will change when ministers meet next in early December. The US-centric crude glut had shown signs of easing by mid-year, but the US remained a well-supplied market. US crude production was up in July, but that was thanks to the fluctuations of offshore drilling, not the shale basins.
There may be noises-off from Opec’s suffering periphery — mostly Algeria and Venezuela — but Nigeria is too busy getting its house in order to join in the group’s internal wrangling, denying the naysayers the strength of numbers. A post-sanctions surge of Iranian oil won’t be back on the market by the December meeting. There are signs of movement in Libya’s oil industry, but no-one is yet willing to call it a twitch of life rather than a death rattle.
Two straight weeks of US inventory declines couldn’t force the price higher and this week’s unexpected reversal of that short trend is unlikely to help. On the demand side, slowing Chinese stockpiling is drawing the focus of attention, while the latest European manufacturing indicator from Markit Economics has come with a deflation warning.
The signs for crude are not necessarily pointing lower, but they sure aren’t pointing up.
A push higher may need a black swan event. With that in mind, some are turning their eyes to the mid-Atlantic, where tropical storm Joaquin has just been upgraded to a hurricane. It’s early days, but there is a chance Hurricane Joaquin could make landfall near the New York Harbour hub. Then, all short-term bets are off.