How crucial is OPEC’s management of supply for the market moving forward?

If we remove the political noise, maintaining a consistent strategy is crucial. The market places a lot of forward expectations on their actions. The current Brent price is a level that OPEC+ should be content with. However, if hostilities ceased and global tensions calmed, the fundamentals would restore inventory draws and could help restore balance. Many analysts foresee modest stock builds early next year, which could create more certainty regarding spare capacity as a buffer in the market, potentially pushing prices lower. On OPEC+ compliance, it’s been important that some non-compliant nations were brought into the public eye, and this has helped rectify the situation. It’s crucial to ensure no slippage in compliance, as that adds up over the course of a year. There has also been significant maintenance in places like the UAE, which could reduce output substantially. And the idea that resuming production in December could be bearish misses the point - it was always part of the plan; let’s not forget that Asia’s demand for oil peaks in December every year.

Is the oil market prepared for a significant potential physical disruption?

Iranian exports are already near full capacity, and any significant disruption would tighten the market further. Losing spare capacity to cover such a disruption would be bullish for oil prices, especially in a tight market. But the market seemed relatively calm last week, despite the potential for serious supply disruptions. Many traders expect volatility, and some are positioning for oil prices to rise toward $90 or even $100 if infrastructure gets hit. The question is whether the situation will escalate to that level.

What will be your key indicator in Q4 for the oil market?

If we disregard all the geopolitical events of the past two weeks, demand will play a key role. The constant revisions to demand seem to have come to an end. People are now likely to revise Chinese numbers back up, as the downward revisions may have been overdone. The undeniable reality, is that we have more non-OPEC oil coming onto the market than there is demand in the current rather bearish outlook, and this poses an ongoing challenge for OPEC+ to manage.