Brent Set To Post Largest Quarterly Drop Since Q1 2020, OPEC+ Meeting Next Week

Brent crude is down slightly from NY closing levels. Last around $88.30, after we couldn't hold above $89/bbl through the NY session. Whilst key USD FX indices were lower, slumping equities and rebounding yields dented risk appetite. Brent is still set for a weekly gain (currently +2.6%), the first for September. However, we are comfortably down for the month and quarter (-23%). WTI is holding above $81/bbl, running out of steam above $82/bbl overnight.

• Amidst the largest quarterly drop in Brent since Q1 2020, next week's OPEC+ meeting (October 5), will be in focus around the supply outlook into year end.
• A Bloomberg survey of 19 traders/analysts indicated all but one expected a drop in production. The likes of UBS and J.P. Morgan expect a cut of at least 500k barrels per day, while RBC looks for a drop potentially as big as 1 million barrels.
• On the demand side, US data continues to defy tighter financial conditions.
• While today's China PMI updates were disappointing, in aggregate, and continue to cast a shadow over the growth outlook. Activity in the services/SME sector eased noticeably.
• Still, with the Chengdu lockdown behind, momentum may improve in September. Driving activity in the city has picked up through tail end of this month (see this link for more details).