Oil market anchors around $70/b, but volatility to return

The oil market is arguably back in a sweet spot. The only shock in the September OPEC+ meeting was how quickly it was wrapped up, demand is now normalizing and balance is being restored. After 18 months of a painful demand narrative, supply risks could soon become a sore point.

Commentators often talk of a Goldilocks price for crude. One that isn’t too high that it quells demand and one that isn’t too low that it disincentivizes production. Listening to some big oil consumers in recent months it was clear that the approach towards $80/b was making them uncomfortable. At the same time the collapse in prices under Covid hurt US shale and crushed investment in longer-cycle oil projects.