Since July of this year, the oil market has struggled to regain momentum. It has even reached a point where the price of WTI crude oil fell below $68, a level we have not seen since March 2023.

Meanwhile, the S&P 500, Dow Jones, and XAUUSD have all experienced a remarkable upward surge.

It didn't even help that OPEC+ members delayed the return of some new barrels to the market by two months in early September. The cartel most likely expected a rebound, but it didn't happen.

There are several reasons for gloomy sentiment these past few months. Firstly, countries have consistently missed their production targets, exceeding agreed levels, and thus pushing prices downwards.

For example, in August 2024, production reached 34.56 million barrels, 850,000 barrels per day above the target. Weak signals on supply control have naturally hurt fossil fuel prices.

Second, as the IEA points out, the increase in oil demand during the first half of 2024 was the lowest since the pandemic year of 2020. Consumption declined not only in developed countries but also in China.

Finally, news on the deteriorating labor market, especially after the U.S. economy created 818,000 fewer jobs than initially reported in the 12 months through March 2024.

For the record, we are talking about the largest downward revision since 2009. As a result, fears of a hard landing are growing, which triggered a drop in risk assets and oil.

What about the recent moves? Are they trend reversals?

We first need to understand where this unexpected optimism comes from to answer that. It is not a single factor but a combination of several that has improved the market's mood.

First, some reasonably positive economic data from the United States, indicating that the economy appears to be holding up well and that a recession could be avoided, helped to support oil prices.

Then, the Fed's unexpected decision to lower rates by 50 basis points instead of the 25 analysts had expected raised hopes that demand for black gold could increase. But again, that is more theoretical.

Escalating geopolitical tensions, especially in the Middle East, have also played a role. If the conflict between Israel and Hezbollah escalates, supply chains could be disrupted.

Finally, Beijing has emerged from its lethargy and initiated the active stimulus measures that many expected. These measures have pushed up prices in commodity markets, including oil and industrial metals.