Analys
Market doubting demand but Saudi/Russia are holding a steady course


Brent crude has sold off hard since 28 September. Fear for the health of the global economy and thus oil demand going forward is at the heart of the sell-off. Prior to that, a clarifying message from the Saudi Energy Minister, Prince Abdulaziz bin Salman, at a conference in Calgary on 18 September to a large degree also removed the USD 100/b plus scenario. Speculators had also accumulated significant long positions in oil since a low point in late June. And the last in have probably been hurt in the sell-off and tried to get out. Lastly we have the US oil inventories published on Wednesday this week which were very bearish as they rose almost 5 m b vs an normal draw this time of year of around 2 m b. And specifically gasoline stocks which jumped 6.5 m b to above the 2015-19 level with gasoline refining margins crashing as a result. But amid all this we still have Saudi/Russia which are holding a steady course with cuts and export reductions to end of year with Saudi spicing this up with Official Selling Price of its Extra Light crude to Europe at USD 7.2/b (Premium to Dubai crude) for November which is the highest since 2002. So USD 100/b plus is not in the cards. But neither is USD 50-60-70/b as Saudi his holding a steady course. Our bet is Brent crude averaging USD 85/b in Q4-23 in a balance between what Saudi Arabia wants and needs versus what is a sensible and acceptable level for the global economy.
The December Brent crude oil contract has fallen from an intraday high of USD 95.35/b on 28 September to now USD 83.9/b, a loss of USD 11.4/b. At heart of this decline is concerns for the outlook for the global economy and thus oil demand.
The clear and almost unanimous message from central banks across the board towards the end of September was ”interest rates higher for longer”. Add in flows for US government bonds where China and Japan no longer are big buyers (if at all), the US Fed is a net seller of bonds (QT) rather than a buyer (QE) while the US government is selling more and more bonds. This has driven the US 10yr government bond yield higher and higher to a recent peak of 4.8% which is the highest since 2007. With no relief in sight, this ”interest rate pain” is going to hurt the global economy and thus oil demand. This is probably one key reason/trigger for why oil has sold down so hard recently.
An other reason is probably the message to the market which Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, delivered to the market at a conference in Calgary on 18 September. He made it very clear that the current cuts were not about driving the oil price to the sky, but rather that it was precautionary versus uncertain demand. Further that if demand indeed turned out to be strong then hallelujah, they would produce more. The oil market has probably been a bit confused on this point with some saying that the aim of Saudi cuts was to drive crude oil above USD 100/b. Such kind of views was pushed aside by the Saudi minister. A sustained move above USD 100/b was very unlikely after the minister’s statements.
Speculators added more than 300 million barrels of net long positions late June. These have probably taken money off the table in the recent sell-off and thus contributed to the sharpness in the sell-off.
Then we have the US oil inventory data this Wednesday which gave a very bearish message to the market. Rather than a seasonal draw of around 2 m b the total US commercial crude and product stocks rose 4.6 m b. With this the US commercial oil stocks are only about 15 m b below the smoothed 2015-19 seasonal average. Gasoline stocks roes 6.5 m b to a level slightly above the 2015-19 average with implied US gasoline demand falling to the lowest level since 2008. The gasoline refining margin, the crack, has now collapsed to less than USD 6/b while it was more than USD 30/b in late August. US inventories of crude and middle distillates are still significantly below normal. In total almost 50 m b below the 2015-19 level. This is an uncomfortable situation ahead of the winter which keeps the market in a partial bullish grip.
A key bullish driver for crude oil has been the stellar overall refining margins. This has give refineries incentive to buy as much crude as they could and convert it to oil products which consumers could consume. Bullish for crude oil demand. A part of this bullishness has dissipated with the collapse of the gasoline crack. The diesel and jet fuel cracks are however still unusually strong at USD 26/b and USD 31/b vs. seasonal norms of around USD 16/b. Strong mid-dist cracks and still low inventories of middle distillates ahead of the winter will induce refineries to keep processing crude and churn out oil products. As such we should expect US gasoline stocks to continue higher. Gasoline cracks could thus drop yet lower from an already very low level.
But amid all this bearishness we still have OPEC+. We still have Saudi/Russia. And they are holding a strong and steady course. They are extending existing cuts and export reductions to the end of the year. They haven’t wavered for a second. Backing up this picture of steadfastness is the fact that Saudi Arabia has lifted its Official Selling Prices (OSPs) for November. By USD 0.5/b to USD 3.4/b for its Extra Light grade to Asia vs. a 10yr average of USD 2.3/b. And to Europe it has lifted it to USD 7.2/b which is the highest since 2002. These are reference prices vs. the Dubai marker. With this Saudi Arabia is saying to the market: ”You are free to buy our crude, but it will cost you”. It is a way of making its supply less available to the market. Making it more expensive.
Yes, Brent crude can of course sell off further and test the USD 80/b line for a little while. But Saudi/Russia are holding a steady course and USD 85/b is a great price. It should be acceptable for a shaky global economy as well as for Saudi/Russia for the time being.
The December Brent crude oil contract has fallen like a rock since its intraday high of USD 95.35/b on 28 Sep. Interest rates ”high for longer” has created deep concerns for oil demand going forward.
US commercial crude and product stocks are converging to the 2015-19 average and thus easing the bullishness in the market.
US gasoline stocks were up 6.5 m b last week and are now above the 2015-19 average. They could rise yet higher as implied demand is very weak and refineries keeps producing more gasoline because they are trying to satisfy the market’s craving for middle distillates where stocks are still low.
As a result the ARA gasoline crack has crashed to less than USD 6/b and could fall further.
But Saudi Arabia is holding a strong and steady course. It keeps its production at 9 m b/d vs. a normal of 10 m b/d to the end of the year. And to back it up it has lifted its official selling prices further to Asia and to the highest since 2002 to Europe (Extra Light).
Analys
Increasing risk that OPEC+ will unwind the last 1.65 mb/d of cuts when they meet on 7 September

Pushed higher by falling US inventories and positive Jackson Hall signals. Brent crude traded up 2.9% last week to a close of $67.73/b. It traded between $65.3/b and $68.0/b with the low early in the week and the high on Friday. US oil inventory draws together with positive signals from Powel at Jackson Hall signaling that rate cuts are highly likely helped to drive both oil and equities higher.

Ticking higher for a fourth day in a row. Bank holiday in the UK calls for muted European session. Brent crude is inching 0.2% higher this morning to $67.9/b which if it holds will be the fourth trading day in a row with gains. Price action in the European session will likely be quite muted due to bank holiday in the UK today.
OPEC+ is lifting production but we keep waiting for the surplus to show up. The rapid unwinding of voluntary cuts by OPEC+ has placed the market in a waiting position. Waiting for the surplus to emerge and materialize. Waiting for OECD stocks to rise rapidly and visibly. Waiting for US crude and product stocks to rise. Waiting for crude oil forward curves to bend into proper contango. Waiting for increasing supply of medium sour crude from OPEC+ to push sour cracks lower and to push Mid-East sour crudes to increasing discounts to light sweet Brent crude. In anticipation of this the market has traded Brent and WTI crude benchmarks up to $10/b lower than what solely looking at present OECD inventories, US inventories and front-end backwardation would have warranted.
Quite a few pockets of strength. Dubai sour crude is trading at a premium to Brent crude! The front-end of the crude oil curves are still in backwardation. High sulfur fuel oil in ARA has weakened from parity with Brent crude in May, but is still only trading at a discount of $5.6/b to Brent versus a more normal discount of $10/b. ARA middle distillates are trading at a premium of $25/b versus Brent crude versus a more normal $15-20/b. US crude stocks are at the lowest seasonal level since 2018. And lastly, the Dubai sour crude marker is trading a premium to Brent crude (light sweet crude in Europe) as highlighted by Bloomberg this morning. Dubai is normally at a discount to Brent. With more medium sour crude from OPEC+ in general and the Middle East specifically, the widespread and natural expectation has been that Dubai should trade at an increasing discount to Brent. the opposite has happened. Dubai traded at a discount of $2.3/b to Brent in early June. Dubai has since then been on a steady strengthening path versus Brent crude and Dubai is today trading at a premium of $1.3/b. Quite unusual in general but especially so now that OPEC+ is supposed to produce more.
This makes the upcoming OPEC+ meeting on 7 September even more of a thrill. At stake is the next and last layer of 1.65 mb/d of voluntary cuts to unwind. The market described above shows pockets of strength blinking here and there. This clearly increases the chance that OPEC+ decides to unwind the remaining 1.65 mb/d of voluntary cuts when they meet on 7 September to discuss production in October. Though maybe they split it over two or three months of unwind. After that the group can start again with a clean slate and discuss OPEC+ wide cuts rather than voluntary cuts by a sub-group. That paves the way for OPEC+ wide cuts into Q1-26 where a large surplus is projected unless the group kicks in with cuts.
The Dubai medium sour crude oil marker usually trades at a discount to Brent crude. More oil from the Middle East as they unwind cuts should make that discount to Brent crude even more pronounced. Dubai has instead traded steadily stronger versus Brent since late May.

The Brent crude oil forward curve (latest in white) keeps stuck in backwardation at the front end of the curve. I.e. it is still a tight crude oil market at present. The smile-effect is the market anticipation of surplus down the road.

Analys
Brent edges higher as India–Russia oil trade draws U.S. ire and Powell takes the stage at Jackson Hole

Best price since early August. Brent crude gained 1.2% yesterday to settle at USD 67.67/b, the highest close since early August and the second day of gains. Prices traded to an intraday low of USD 66.74/b before closing up on the day. This morning Brent is ticking slightly higher at USD 67.76/b as the market steadies ahead of Fed Chair Jerome Powell’s Jackson Hole speech later today.

No Russia/Ukraine peace in sight and India getting heat from US over imports of Russian oil. Yesterday’s price action was driven by renewed geopolitical tension and steady underlying demand. Stalled ceasefire talks between Russia and Ukraine helped maintain a modest risk premium, while the spotlight turned to India’s continued imports of Russian crude. Trump sharply criticized New Delhi’s purchases, threatening higher tariffs and possible sanctions. His administration has already announced tariff hikes on Indian goods from 25% to 50% later this month. India has pushed back, defending its right to diversify crude sourcing and highlighting that it also buys oil from the U.S. Moscow meanwhile reaffirmed its commitment to supply India, deepening the impression that global energy flows are becoming increasingly politicized.
Holding steady this morning awaiting Powell’s address at Jackson Hall. This morning the main market focus is Powell’s address at Jackson Hole. It is set to be the key event for markets today, with traders parsing every word for signals on the Fed’s policy path. A September rate cut is still the base case but the odds have slipped from almost certainty earlier this month to around three-quarters. Sticky inflation data have tempered expectations, raising the stakes for Powell to strike the right balance between growth concerns and inflation risks. His tone will shape global risk sentiment into the weekend and will be closely watched for implications on the oil demand outlook.
For now, oil is holding steady with geopolitical frictions lending support and macro uncertainty keeping gains in check.
Oil market is starting to think and worry about next OPEC+ meeting on 7 September. While still a good two weeks to go, the next OPEC+ meeting on 7 September will be crucial for the oil market. After approving hefty production hikes in August and September, the question is now whether the group will also unwind the remaining 1.65 million bpd of voluntary cuts. Thereby completing the full phase-out of voluntary reductions well ahead of schedule. The decision will test OPEC+’s balancing act between volume-driven influence and price stability. The gathering on 7 September may give the clearest signal yet of whether the group will pause, pivot, or press ahead.
Analys
Brent sideways on sanctions and peace talks

Brent crude is currently trading around USD 66.2 per barrel, following a relatively tight session on Monday, where prices ranged between USD 65.3 and USD 66.8. While expectations of higher OPEC+ supply continue to weigh on sentiment, recent headlines have been dominated by geopolitics – particularly developments in Washington.

At the center is the White House meeting between Trump, Zelenskyy, and several key European leaders. During the meeting, Trump reportedly placed a direct call to Putin to discuss a potential bilateral sit-down between Putin and Zelenskyy, which several European officials have said could take place within two weeks.
While the Kremlin’s response remains vague, markets have interpreted this as a modestly positive signal, with both equities and global oil prices holding steady. Brent is marginally lower since yesterday’s close, while U.S. and Asian equity markets remain broadly flat.
Still, the political undertone is shifting, and markets may be underestimating the longer-term implications. According to the NY times, Putin has proposed a peace plan under which Russia would claim full control of the Donbas in exchange for dropping demands over Kherson and Zaporizhzhia – territories it has not yet seized.
Meanwhile, discussions around Ukraine’s long-term security framework are starting to take shape. Zelenskyy appeared encouraged by Trump’s openness to supporting a post-war security guarantee for Ukraine. While the exact terms remain unclear, U.S. special envoy Steve Witkoff stated that Putin had signaled willingness to allow Washington and its allies to offer Kyiv a NATO-style collective defense guarantee – a move that would significantly reshape the regional security landscape.
As diplomatic efforts gain momentum, markets are also beginning to assess the potential consequences of a partial or full rollback of U.S. sanctions on Russian energy. Any unwind would likely be gradual and uneven, especially if European allies resist or delay alignment. The U.S. could act unilaterally by loosening financial restrictions, granting Russian firms greater access to Western capital and services, and effectively neutralizing the price cap mechanism. However, the EU embargo on Russian crude and products remains a more immediate constraint on flows – particularly as it continues to tighten.
Even if the U.S. were to ease restrictions, Moscow would remain heavily reliant on buyers like India and China to absorb the majority of its crude exports, as European countries are unlikely to quickly re-engage in energy trade. That shift is already playing out. As India pulls back amid newly doubled U.S. tariffs – a response to its ongoing Russian oil purchases – Chinese refiners have stepped in.
So far in August, Chinese imports of Russia’s Urals crude – typically shipped from Baltic and Black Sea ports – have nearly doubled from the YTD average, with at least two tankers idling off Zhoushan and more reportedly en route (Kpler data). The uptick is driven by attractive pricing and the absence of direct U.S. trade penalties on China, which remains in a delicate tariff truce with Washington.
Indian refiners, by contrast, are notably more cautious – receiving offers but accepting few. The takeaway is clear: China is acting as the buyer of last resort for surplus Russian barrels, likely directing them into strategic storage. While this may temporarily cushion the effects of sanctions relief, it cannot fully offset the constraints imposed by Europe’s ongoing absence.
As a result, any meaningful boost to global supply from a rollback of U.S. sanctions on Russia may take longer to materialize than headlines suggest.
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