Crude markets are still trading unusually quiet but a little lower over the past 24 hours, despite getting support from broader markets recovering after yesterday’s FOMC minutes induced sell-off and the Energy Information Administration (EIA) crude inventories data not showing the gasoline build reported in the earlier API.

It seems that the current market observation concerning the steep decline in volatility in the crude oil price continues to hold. The oil Vix measure of volatility is now back to mid-Feb levels.

We have dealt with a couple of sentiment dampeners this week, the latest coming from the US macro front. And for oil markets, it does not read like the end of summer’s great American road trip is rolling into a town near you.

Jobless claims rise

US initial jobless claims came in higher than forecasts, which is the equivalent of throwing a damp towel on sentiment as you can quickly draw a straight-line demand curve from US employment to US gasoline purchases.

And with 28 million Americans still getting the short shrift from the Congress stimulus package dithering. If the claims data do not provide a reality check for them to start delivering checks, well, it could be a cloudy Labor Day weekend for many unemployed Americans. The irony is certainly not lost on me “Labor Day ” weekend.

OPEC+ laggards in focus

The Joint Ministerial Monitoring Committee (JMMC) continued to focus on reigning in laggards, which should be supportive for prices. And although Iraq has made progress but remains above quota, and Nigeria is still significantly over-producing, has been given until August 28th to deliver detailed plans for coming into compliance and over-compensating for their failure to cut production so far.

Industry reports estimate that 1.2mb/d of additional cuts through August and September are needed to offset oversupply to date, implying OPEC+ cuts fall to 8.9mb/d in the current phase instead of the 7.7mb/d target.

But with enforcement tactics reduced to merely public smearing of laggards or a very unlikely disbanding of the agreement, the proof will need to be in the pudding as it remains critical that non-compliant members toe the line to bring the markets closer to equilibrium.

Hopefully, the ongoing recovery of global demand will relieve some pressure on the OPEC+ group. However, it is worth noting OPEC+ release did suggest there remains “growing risks” of a prolonged second wave and also hinted that the global recovery is moving more slowly than expected.

As such, oil prices might be capped in the near term if OPEC+ compliance and the return of non-OPEC production, particularly in the shale patch, become more of an issue.

COVID -19 front

ON the health front, there is no question that traders are still peering into a cloudy viewfinder as even with new COVID-19 cases declining across the US, we know that can change on a dime as evidenced by recent 2nd wave breakouts around the world.

And it is going to take some time for people to feel safe to move freely and possibly only when a vaccine is in hand.

Oil markets analysis and insights from Stephen Innes, Chief Global Market Strategist at AxiCorp