What outcome to expect to from Vienna

6 December, 2018

A few months ago, some investors speculated that Oil prices could reach $100 per barrel in 2018. Sanctions on Iran, shortages in supplies, strong demand, and an all-time low in spare capacity were all factors contributing to driving prices to new highs. This proved to be a bad speculation. After OPEC’s meeting in June, the cartel decided to ramp up production to meet any supply shortages. What happened next was the U.S. issuing eight countries for waivers before sanction on Iran kicks off, global demand seemed to have abated, and production in the U.S., Saudi Arabia, and the United Arab Emirates reached a new high. These factors combined led to a free fall in prices where Brent lost third of its value from October’s peak.

Today’s OPEC meeting is held at a very critical time where there’s clear evidence of a global economic slowdown and strong Oil supply particularly from the U.S. which will eventually lead to oversupply and swelling inventories.

The current environment requires a strong response and is definitely a case for cutting supply to save prices from falling further in 2019. While we think that a cut in production will be announced in Vienna today, the more critical question is by how much, and how the cartel would divide the cuts among members and non-members?

This is where it becomes tricky. Although Russia agreed in principle to cutting production, they do not feel the same urgency as the Saudis. That’s simply because Russia’s economy is more diversified and the Ruble is free floating. Higher revenues from a strong rally in Oil prices will be offset by a rising currency. A range of $50-$60 is just fine for Russia. Meanwhile, Saudi Arabia needs Oil price at $85 to balance its budget, according to the IMF. 

Iraq is also under severe economic pressure and doesn’t want to cut production. If it was forced to, there’s an increasing chance of leaving the cartel eventually.

The base case scenario seems that Saudi Arabia will shoulder most of the burden with a symbolic cut from Russia.

OPEC+ are also aware that a high spike in Oil prices will attract more anger from the U.S. President.  So, expect the cut to be anywhere between 1 – 1.5 million barrels per day from November’s level, and the situation will be reevaluated in 2019. Under this scenario, prices may remain range bound until year end. 


Source link  
Investors on sidelines ahead of weekend

Equity markets moved in different directions yesterday, as positive Chinese data failed to boost risk appetite. The S&P 500 slipped 0.23%...

China stimulus measures bearing fruit

Investors hoping for better-than-expected data from the world's second largest economy were not disappointed on Wednesday. China's economy...

Stock market rally takes breather

Stocks in Asia eked out gains during early trading even as the S&P500 eased off its six-month high, after disappointing results from Goldman...


Asian stocks feeding off strong start

European equities look set to attempt to follow the trend from Asian markets on Monday morning by starting the week off in the green, as risk...

EM currencies threatened

It has certainly been another eventful trading week for financial markets as global growth concerns, US-China trade developments and Brexit...

Another central bank turns dovish

The Reserve Bank of New Zealand (RBNZ) is the latest central bank to join the global trend of taking a U-turn. It was only last month when RBNZ Governor...


Apple shares tumbled nearly 2%

Apple shares tumbled nearly 2% on Monday despite the company unveiling a series of new services at its campus in Cupertino, California. The technology giant...

Asia joins Friday's sell-off

The selloff in US and European stock markets from Friday has spread across Asia at the start of the new trading week, as concerns over the health...

Recovery of emerging markets

The recovery that emerging markets have managed to build throughout the first quarter of 2019 is set to extend further after the downbeat...


In the past 24 hours Bitcoin has lost -1.33% and reached $5265.6083185. Open your trading account with the best cryptocurrency brokers on special terms today.

In the past 7 days the EUR/USD pair has lost -0.4259% and is now at $1.1296. Start trading and making money on Forex today.

In the past 7 days Ethereum has gained 1.81% and is now at $168.365046317. Have the most popular cryptocurrencies compared online 24/7.


Top Brokers offering Forex Market Analysis



Forex Currencies Forecasts



Top 10 Forex Brokers 2019

# Broker Review
1easyMarketseasyMarkets93%
2FXTMFXTM90%
3HYCMHYCM89%
4FxProFxPro87%
5FIBO GroupFIBO Group85%
6OctaFXOctaFX83%
7HotForexHotForex82%
8FXCMFXCM79%
9AlpariAlpari78%
10XMXM73%
  


Share: