Crude oil surged after the Energy Information Administration reported a bullish to consensus crude oil inventory draw of 4.4 million barrels for the week to September 11. The Feds "lower- for-longer interest rate narrative" also lent a modicum of support to the medium to longer-term demand profile.

But it was the redoubtable combination of tightening supplies and China's reflationary spark (robust activity data) that set the price recovery wheels in motion and has provided a convincing bump to offset the slump in crude prices that began in the closing week of the US driving season. China’s 2020-21 economic roadmap to recovery calls for boosting the potential of its enormous consumption market, which should be favorable for the medium-term viewfinder. 

But it was the inventory draws that provided a much welcome Alka Seltzer moment after oil traders digested a combination of gloomy agency short-term forecasts and BP's bleak warning that the era of oil demand growth is likely over. 

The OPEC+ JMMC meets today but is not widely expected to recommend any changes. Still, it will be crucial for the JMMC to manage the perception that compliance is an issue for the group and send a strong signal that OPEC+ remains committed to a stricter level of laggard compensation and maintaining cuts for the full duration of the OPEC+ agreement.

And buttressing a stouter compliance view, the new problem producer UAE has assured the group they will compensate for pumping too much oil for the past few months, which has further boosted sentiment.

Finally, as far as the post-JMMC impact – beyond reaffirming compliance and perhaps some resolution on catching up quota volumes – we should expect limited new news and certainly nothing to significantly bump the crude market out of its current funk and push Brent back to $45 bbl. 

And judging by the dismal read on the latest US retail sales data, by no means are we over the hump just yet as there’s a lot more wood to chop on the economic front.

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