As hindsight as it may sound, there was always little chance of a breakthrough in the Ukraine peace initiative undertaken by US representatives in Moscow. After five hours a Kremlin spokesman briefed reporters saying the talks were “very useful, constructive, and highly substantive,” but a “compromise option was not found.” No end to wars ever come at the first reach toward compromise, let alone with a Russian president whose uppermost concern is whether this current bout of negotiations can be used to buy time. “The work will continue,” so the brief went on which does not dismiss a future deal but does not mean hostilities will immediately cease. There was also the Putin hand of obfuscation aiding his bid for precious elongation. Citing an unwelcome intervention by the bloc, the Russian leader accused Europe of interjecting unacceptable proposals which he used to threaten war against his Western neighbours. Still, while talks are not dismissed and US sanctions threats run lukewarm, Russian oil remains very much a part of global supply consideration.

This soporific and slightly price-negative to neutral outcome is aided by ongoing repairs to Caspian Pipeline Consortium moorings in the Black Sea seeking to restore CPC Blend oil exports after damage caused by Ukraine drones over the weekend. Reuters report one mooring as operational with an additional coming online within seven days after being shutdown due to planned maintenance. If CPC once again flows unhindered, it will add to a market surrounded by opinions of oversupply. This stream of consciousness is added to by builds in the private American Petroleum Institutes weekly inventory review. Crude stocks rose by 2.5mb, Gasoline by 3.1mb and Distillate by 2.9mb with each having expected draws or much lower builds.
 

Not as haphazard as one might think

Markets forces and geopolitical developments, if they are exclusive, will conspire to thwart any idea of a peaceful run into Christmas and the New Year. Money never sleeps and with a businessman in charge of the world’s most powerful office there will be no rest for the wicked, or even for that matter, the saintly. There is no more apposite inkling aired in Mr Trump’s book, ‘The Art of the Deal’, foretelling how his tenure might play out in the Oval Office than his take on not being bogged down by singularity of thought. "I never get too attached to one deal or one approach. For starters, I keep a lot of balls in the air, because most deals fall out, no matter how promising they seem at first." Supplant and substitute relationships with countries, Presidents, Prime Ministers, captains of industry and billionaires in the stead of ‘deal’ or ‘deals’ and one might be hard-pressed to come up with a better summation of his leadership in what is not even yet one year. 

It is all well and good addressing something in the abstract or even with oblique satire, but there has never been a time in markets where headlines are so capable of moving prices and because the subjects of news alerts involved are continually varied, they remain tender to the touch until something else comes along, as it always does. There are obviously exceptions, the way our commodity became inured to notions of Middle East conflagration is one, but that did not stop reaction from the individual instances of piecemeal war which Israel visited on its neighbours. Yet, herein lies another level of intrigue to market behaviour. Our fraternity and even our market’s prices have all but forgotten Gaza and its possible fallout assets. They have been buried under so many convening drivers. While any relighting of this bonfire of the humanities will be tempered by experience, we will suddenly have to consider price premium again with an all but new gaze. 

The pace and volume of edicts, proposals and asides emerging from the White House often leaves a sense of unfinished business from those that initiate risk. The opportunity to digest and analyse before a buy or sell button is pressed is extremely limited. Decisions are rushed and consequence being a binary gamble relying on the veracity of headlines and the initiator or news source, rather than a studied probability of outcome. This is particularly acute in oil circles. Our market is subject to all the usual drivers of commodities such as inventory, production, weather, demand, freight and foreign exchange. But unlike any other consumable, combustible or builder, oil has been weaponised and while this is nothing new, the aftermath of the Ukraine war and an oil-aware incumbent President has seen this weaponization expand. 

Every US President must have at least a passing interest in the value of oil, not only in its price but the power it wields within the US economy. The 47th version is almost partisan in his support for fossil fuels and has been a proponent of the oil industry so readily embodied in “drill, baby drill.” He wages continued war on green policies and renewable energy and in turn his bias is called out by the critique ‘Public Citizen and the Revolving Door project’. It recently analysed the backgrounds of Trump appointees and found 111 having fossil fuel sympathies with 43 of them being former fossil fuel industry employees. Therefore, it does seem unlikely when the Donald pontificates on Russia for example he is not made fully aware how opposing and counterintuitive interventions will cause initial price swing and then stasis. This refers to our current set out conundrum where Trump spouts on how US sanctions are about to choke the life from the Kremlin’s war machine while at the same time the US President underwrites a plan to bring an end to the war which must entail Russia being free to be about its oil business unencumbered. Crown Prince Mohammed bin Salman has been feted at the White House, the Saudi Royal might have been there for F35s, but it cannot be a hard stretch that any arms deal would have a stipulation on Saudi once again being OPEC’s ‘swing producer’ if Russian exports were suddenly excluded from the oil supply puzzle, or indeed the opposite. Every action and word from this Administration is about control. Control of the oil price and the narrative surrounding it. The lexicon and feints of America’s highest office have triggered more stop losses and position reversals than any disaster or natural event this year and our market can do little other than acquiesce to the thrall. Inventories are not in charge, refinery margins are not the game changer, neither are interest rates or OPEC+. 

The WTI and Brent mean is running at $60/barrel, it is a Goldilocks price for the US President. He can threaten sanction and restriction knowing it would take a herculean effort to get to $70 and inflate the US economy. He can be appeasing and a war ender without prices falling to a US oil industry crippling $50. The oil price range is within perfect tolerance for Donald J. Trump and while he will “never get too attached to one deal or one approach” and that he will always “keep a lot of balls in the air”, giving rise to seemingly random changes of his heart and skipped beats to our collective circadian rhythm; Mr Trump has oil prices exactly where he thinks America wants them. And we think he knows it.

Overnight Pricing