Brent crude began trading at $88.5/bbl in September, gradually rising throughout the month and peaking at $96.5/bbl, before stabilising around $92.5/bbl by month-end. The demand outlook was strengthened on the first day of the month, as China introduced a new economic package to bolster the country’s faltering economy. Since the introduction of these stimulus measures, latest data has showed signs of economic stability in China, with increased oil refinery output. The first week of September also saw OPEC+ majors, Saudi Arabia and Russia, pledging to extend their supply cuts until the end of the year, leading to forecasts of a substantial market deficit through the fourth quarter of 2023, according to the International Energy Agency (IEA). Towards the end of the month, global supply tightening was exacerbated by Russia announcing a temporary ban on fuel exports to all countries, except four ex-Soviet states. Alongside supply constraints, depleting US crude stock pushed oil prices higher, with inventories around 4% below the five-year average for this time of year. Overall, Brent crude reached the highest level since November 2022, increasing by around $4/bbl across September.

GBP traded at $1.262 against USD at the beginning of September, depreciating to $1.225 by month-end, around its lowest level since March. A series of key economic data highlighted dampening growth in the UK and a bleak economic outlook overall; the economy contracted by 0.5% in July (the most significant decline this year), unemployment reached 4.3% in the May-July quarter and the latest decline in activity marked the sharpest since March 2009 (excluding pandemic-related disruptions). This data, alongside the CPI measure of inflation easing to 6.7% in August from 6.8% in July, led to the Bank of England maintaining the 5.25% interest rate after fourteen consecutive hikes. The decision comes after the Bank of England’s Governor Andrew Bailey stated that the monetary policy tightening cycle was nearing its conclusion, in addition to member Swati Dhingra expressing concerns that further interest rates could potentially harm the economy. Meanwhile, a strengthening dollar and evidence of a resilient US economy caused GBP to depreciate to $1.225 by month-end, its worst monthly performance in over a year. Based on current wholesale diesel prices, a four-cent decline in GBP equates to a c. 2ppl rise in the price of UK diesel.

Climate change and the global commitment to net zero dominated energy news headlines in September. Governments have recognised the importance of battery storage projects to achieve net zero, with US businesses committing $122 billion to clean energy products in August, and South Korea and Japan both announcing financial support packages for their battery supply chains. Moreover, California launched a climate lawsuit against several global oil companies, including Exxon, Shell and BP, for decades of public deception resulting in billions of dollars in damage from climate change. In the UK, Prime Minister Rishi Sunak announced a series of U-turns on climate policies, including a five-year delay on the ban of new petrol and diesel cars, met with international criticism and accused of ‘destroying’ UK green credibility. Meanwhile, the IEA reported that the 1.5C limit on global warming is still possible following record growth in clean energy technology, yet requires governments to increase funding and separate climate from geopolitics. Finally, the end of the month saw escalating conflict with Ukraine claiming to have killed Russia’s Black Sea fleet commander, Viktor Sokolov, during an unprecedented missile strike on Crimea, however Russia disputes the claims.