Last week was positive for the oil markets. Brent rose by just below 4.1 percent between Monday and its high point on Thursday. This was on the back of extraordinarily good data. US crude stocks fell by 10 million bpd according to the US Department of Energy. Product stocks fell too. Markets rallied when Donald Trump mentioned on Monday at a press conference during the G7 summit that he had positive communications with the Chinese and that trade negotiations would continue. In the month of July OPEC+ (an alliance between OPEC and 10 friendly nations) had a stunning 159 percent compliance with a deal that they struck last June in Vienna, which was designed to take 1.2 million bpd out of the market. US-induced sanctions on Iran and Venezuela (both OPEC members) contributed to the numbers. All of this helped to reduce the inventory overhang. Alas, the storm clouds are gathering. Year-on-year demand growth for the month of August stood at 600,000 bpd, which is about 50 percent below the consensus forecast for 2019. In the short run this trend was exacerbated by Hurricane Dorian, which sent demand forecasts tumbling and had an immediate effect on WTI. (Dorian did also lead to gasoline shortages in Florida.) In the longer run, South Korea serves as a good example for how trade wars affect oil demand. Its exports fell for the ninth consecutive month because its exports to its largest market, China, fell considerably. The flow of exports was also disturbed by its own mini-trade war with Japan. When countries export less, they require less oil and petrochemicals to manufacture and ship their products. Sunday, Sept. 1 was a pertinent day because China levied a 5 percent tariff on imports of US crude for the first time. On the same day the US levied a 15 percent tariff on certain types of Chinese apparel and consumer electronics. So much for demand. Supply is set to increase as well. In August OPEC output rose again because lower production in Saudi Arabia as well as the hamstrung output from Iran and Venezuela could not offset the increased volumes from Nigeria and Iraq. Russia was also successful in clearing up the contamination issues from the Druzhba, which will result in higher export volumes. The country’s exports rose to 11.3 bpd for the month of August. Looking forward, a cut of 1.2 million bpd from OPEC+ may not be enough to keep markets balanced. On Sept. 12 the Joint Ministerial Monitoring Committee (JMMC) will convene in Abu Dhabi. It is tasked with monitoring compliance with the deal that was reached in June in Vienna and is ably chaired by Russian Energy Minister Alexander Novak and his Saudi energy counterpart, Khalid Al-Falih. The JMMC will need to assess market developments over the next two weeks and the impact of lower demand and higher production. Progress in the trade negotiations between the US and China or the lack thereof will feature prominently. It will be interesting to see how Russia interprets the changed outlook. Russian producers are exerting pressure on Alexander Novak because they want to bring more oil from newer wells on stream and on to international markets. Observers should watch out for his comments. They will indicate the direction of travel for Russia, which is the leader among the non-OPEC countries in OPEC+. All in all, it looks like the current production cuts will not suffice and OPEC+ may need to go further. The ministers will assess, but final decisions will have to be taken at the next OPEC conference of ministers, which is currently scheduled to take place in early December. On Monday oil closed down 2.3 percent from its Thursday high in early European trading. Brent stood at $58.97 per barrel.