Oil prices have become volatile in September as two big oil members of OPEC+, i.e., Russia and Saudi Arabia, declared in early August that they would be cutting oil supply by over a million barrels to reinforce precautionary efforts made by OPEC+ countries to support the stability and balance of oil markets. Oil prices traded in a correcting pattern throughout August, with crude oil settling from a high of $85 in early August to $79 in the last week of the month. Prices moved higher by the end of the month as fundamentals came to the fore once again and breached $90/bbl for the first time in 10 months after Saudi Arabia and Russia extended voluntary production cuts until the end of 2023.

Saudi Arabia's production for September will be around 9 million barrels per day (bpd). Russia will also cut oil exports by 300,000 bpd in September. The move pushed crude prices to above $90 per barrel in a couple of sessions and the highest level in 10 months. According to the IEA, the extension of output cuts by Saudi Arabia and Russia through year-end will lock in a substantial market deficit through the last quarter. So far this year, OPEC+ output has fallen by 2 mb/d, with overall losses tempered by sharply higher Iranian flows. Non-OPEC+ supply rose by 1.9 mb/d to a record 50.5 mb/d by August.

The OPEC goal, even though not commented in the media, has been to lower the global oil inventory. According to the IEA, global oil inventories plummeted by 76.3 mb to a 13-month low in August, led by a hefty decline in oil prices. Non-OECD oil stocks fell by 20.8 mb, with the largest draw seen in China, while OECD inventories eased by 3.2 mb. The recent rise in US inflation numbers, led by a sharp increase in energy prices in August, could force the US government to drain out its strategic oil reserves to cool down inflation, with the election in the near term.

China being a volatile player can turn the table upside down in just one commentary and is the main wild card, as the oil demand from the world's biggest oil importer has so far remained remarkably unaffected and import data has painted a bullish data id demand, but the devil is always in details. According to the chart published by Reuters, vast quantities of oil are flowing into inventories. In August, China added about 1.32 million barrels per day (bpd) to its strategic crude stockpiles. China's refiners processed an equivalent of 15.23 million bpd in July, up 19.6% from a year ago and also stronger than July's 14.87 million bpd. Crude imports and domestic output were 16.55 million bpd in August, and after removing the refining of 15.23 million bpd, a surplus of 1.32 million bpd flowed into storage tanks. For the first eight months of the year, China added about 197 million barrels.