Brent crude declined from $85/bbl to $83/bbl throughout November, due to a mixed supply outlook and a worsening demand sentiment. The concerns of potential supply disruptions due to the Israel-Hamas war began to ease in November, as Iran’s Foreign Minister stated that Iran does not want the conflict to spread. OPEC attempted to support prices as Saudi Arabia and Russia pledged to extend output cuts until year-end, to be reviewed again in December. The group also claimed that market fundamentals remain strong, and blamed the recent price drop on financial market speculators. However, the International Energy Administration (IEA) announced that supply would not be as tight as originally anticipated during Q4, and demand uncertainties persisted with rising US crude inventories and declining Chinese exports, causing Brent crude to reach its lowest price since July at $77/bbl by mid-month. Increased uncertainty was caused by OPEC+ postponing its meeting due to a dispute over output quotas for African members, with the group expected to deepen supply cuts in the next meeting. Brent crude recovered to $83/bbl by month-end, falling by $2/bbl across the month.

GBP traded at $1.212 at the beginning of November and strengthened to $1.266 by month-end, around the highest level since September. The Consumer Price Index (CPI) inflation fell to 4.6%, from 6.7% in September, reaching the lowest rate since October 2021. The Bank of England held interest rates at 5.25%, after Governor Andrew Bailey noted that inflation figures aligned with the bank’s expectations. Investors have forecast a significant likelihood that the bank will commence interest rate cuts by May next year, however Chief Economist Huw Pill stated that rates must remain sufficiently high for as long as necessary to control stubborn inflation. The UK economy showed no growth in Q3 and is expected to remain stagnant for several months, however Britain is expected to avoid a recession. Additionally, Jeremy Hunt’s autumn statement revealed that the Office for Budget Responsibility (OBR) downgraded UK growth forecasts for the next two years, weighing on the sterling. In the US, consumer price inflation also fell, decreasing the likelihood of further Federal Reserve interest rate hikes. As a result, the US currency is set for its biggest monthly fall in a year, boosting GBP. Based on current wholesale diesel prices, an over five-cent rise in GBP equates to a decline of almost 3ppl in the UK diesel price.

In November, the energy market closely monitored the Israel-Hamas war. On the 24th of November, two weeks after US president Joe Biden stated that there was “no possibility” of a ceasefire between Israel and Hamas, a ceasefire was agreed. Although the truce was extended for a seventh day, there is no sign of the war ending, as Israeli Prime Minister Benjamin Netanyahu vowed to “eliminate Hamas”. The IEA reaffirmed that there has been no material impact on oil supply flows from the war, suggesting that world oil supply growth is currently exceeding expectations. OPEC also claimed that oil markets have been dominated by “overblown negative sentiment” in the November report. In the UK, Jeremy Hunt’s autumn statement made no adjustment to fuel duty, therefore will remain at 52.95ppl for petrol and diesel, after the chancellor announced a 5ppl reduction for 12 months in March. Finally, the UN has claimed that countries such as India, Saudi Arabia, the US and the UK are contradicting their own climate goals with plans that are inconsistent with the global warming 1.5C target. Meanwhile, climate envoys representing 100 countries urged fellow COP28 delegates to successfully agree to limit global warming, a day after leaked documents revealed that the United Arab Emirates planned to use its role as the UN COP28 summit host to negotiate oil deals.