Energy Spotlight: OPEC succeeds in making Brent cost over $90/bbl, but a storm is coming

Fri 14 Oct 22, 3:20pm (AEST)
An offshore gas platform photographed at night, located in the North Sea. Norway will become a major supplier of gas to the EU; much of its gas comes from the North Sea. Owner of platform pictured unclear
Source: Unsplash

Key Points

  • The International Monetary Fund (IMF) this week called a $4T hole in global growth between 2022 and 2027
  • OPEC, the US and the International Energy Agency (IEA) all cut oil demand forecasts this week
  • Shanghai is back in strict lockdown, US inflation at 40 year high, UK economy on track for recession; NASDAQ hit a 2 year low early week, there’s just not much to be positive about right now

One week ago, OPEC pushed the price of Brent Crude back into the $90/bbl range, recklessly threatening inflation recovery around the world (and making it more likely central banks will raise rates higher for longer.) 

As a result, the price remains above $90/bbl, though West Texas Intermediate (WTI) has dipped to $89/bbl. This time two weeks ago, it was starting to look like energy inflation was maybe starting to recede, having hovered in the $80/bbl range for a good while. 

However, OPEC has failed to push the price of oil to its desired target of $100/bbl, for now. The Brent price flirted with US$99/bbl midweek, but didn't stay there too long. A lot of that cooling off has to do with demand outlook. This week, the three following bodies downgraded oil demand forecasts for the rest of the year and into 2023:

  • OPEC itself 

  • The US Department of Energy 

  • The International Energy Agency 

While all three entities being in consensus isn’t particularly unusual, it’s significant in that the forecasts all give added weight to an elephant in the room of global trade and investment: a wave of recessions are coming for most major economies. 

Oh, and US core inflation is at a 40 year high. 

If the UK is a recession canary, then…

This can be seen in the UK’s GDP August growth data released this week, which logged a contraction. June was a contraction, July went up, but August was back down. Because of 0.1% growth in July, the UK is technically not in a recession, but it’s likely the September data will log another contraction, and then it will be (a recession is widely accepted as kicking in once two consecutive quarters of negative GDP growth are logged.)

You could also make the argument that the UK already is in a recession, which S&P Global believes, regardless of whether or not somebody from the government uses the R-word publicly. 

Of course, there’s a lot of self-consciousness about looking silly in these matters which stifles perfectly reasonable debate, and so you generally won’t hear many people come out and offer an individual view. 

Unless you’re the CEO of JP Morgan, who also forecasts a recession.

Anyway, let’s move on. 

A look at the movements of the Brent Crude price over the last week. Note OPEC's supply cut move did almost push it back to US$1000/bbl mid-week. (Source: TradingEconomics)
A look at the movements of the Brent Crude price over the last week. Note OPEC's supply cut move did almost push it back to US$100/bbl mid-week. (Source: TradingEconomics)

Ok. So what about energy commodities? 

We’ve talked about oil, so a quick recap on gas movements this week. 

US: Gas futures remain in the middle-upper US$6.00/GJ range, still down some 25% from a 14-year high over $9/GJ in August. The price is being kept tame by milder than expected weather (read: less households are using heaters,) allowing greater storage volumes. 

Interestingly, an increased productivity in wind power in the US is also instrumental in keeping gas prices low. I don’t talk about renewables here much, but, there’s that. 

UK: Finally some good news for UK consumers, but not energy traders. About a week ago, UK’s gas storage sites reached full capacity, according to Gas Infrastructure Europe, which has not done much to solicit a bullish rally for the commodity. 

EU: Gas prices for the Dutch TTF futures benchmark have remained mostly steady this week, dipping slightly, but still dramatically higher compared to pre-covid levels. Right now, the EU is busy trying to push forward a measure to install a new gas benchmark price, but the process is leading to a lot of debate from member-state constituents. 

Reports have broken late week ministers may be heading towards a blanket agreement on what to do. In the meantime, the EU has brokered a deal with Norway which will see the latter do its best to replace the volume of Russian gas flows into the country, so traders over in Europe are very much in “watch and wait” mode right now. 

As of mid-afternoon AEST on Friday 14th October, weekly performance for commodities are as below:

  • Brent Crude: down -3.64%

  • WTI Crude: down -3.97%

  • US natgas futures: down -0.63% (up 23% year on year)

  • EU natgas futures: down -12.47% (up 50% year on year)

  • UK natgas futures: down -13.43% (up 9.22% year on year) 

  • Uranium: up 2.55% to US$50/lb 

Gas trading Australia has not published October data for natgas spot prices yet, but likely remain within the A$6/GJ range. 

Macro Environment remains undesirable 

Despite some falls, high oil prices mean high inflation, which means more interest rate rises. Fears that continued interest rate hikes may trigger a recession continue to dampen sentiment wholemeal; and recession appears to be on the cards globally. 

OPEC’s decision to try and push oil back to US$100/bbl hasn’t exactly helped. 

A conflation of macro factors are at play. A non-exhaustive list includes:

  • UK, AU consumer confidence at record lows

  • Chinese lockdowns to extend as yet another rise in cases hits 

  • Geopolitical tension with regards to Russia continues to flare 

  • UK is basically in a recession already, if you accept a flexible definition 

  • JP Morgan has forecast a recession 

  • IMF say the next five years will see a loss of $4T from global economy that could otherwise have been added in normal environment 

Price headwinds

  • Chinese lockdowns remain the status quo with a new caseload high reported this week according to local media

  • Economic sentiment in most major economies from both individuals and entities large and small remains depressed

  • A who’s-who of recessions in major economies appear to be on the way through 2023

Price drivers

  • Southern Hemisphere summer on the way; Northern Hemisphere winter

  • Geopolitical volatility continues to boost gas futures in Western Europe, echoing into US and Asian markets

  • Impact of $90/bbl on inflation dynamics is still months away from being revealed

A look at the movements of Dutch TTF EU natural gas futures over the last week (source: Trading Economics)
A look at the movements of Dutch TTF EU natural gas futures over the last week (source: Trading Economics)

What to look out for next week 


  • Baker Hughes US rig count data


  • 20th National Congress of China’s CCP (week-long event)


  • Chinese GDP growth rate data for Q3

  • Chinese industrial production data for September 

  • RBA meeting minutes


  • UK inflation rate data for September 

  • Canada inflation rate data for September (Canada is an oft overlooked major energy producer and exporter)


  • Oz unemployment rate data 

Oz majors 

Worth noting is that on this Friday’s surprise green day for the ASX (even after the US posted a 40 year high inflation read,) the energy sector is leading the rally up 3.79%.

Despite this:

Woodside (ASX:WDS) one week returns down -2.04%, but,

Beach Energy (ASX:BPT) one week returns up 0.78%

Santos Limited (ASX:STO) one week returns up 0.52%

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Written By

Jonathon Davidson

Finance Writer

Jonathon is a journalism graduate and avid market watcher with exposure to governance, NGO and mining environments. He was most recently hired as an oil and gas specialist for a trade publication.

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