Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
You can access both of our platforms from a single Saxo account.
A nervous crude oil market awaits OPEC’s next move
Ole Hansen
Head of Commodity Strategy
Summary: Crude oil prices remain under pressure with the latest weakness being triggered by OPEC’s decision to delay the meeting originally planned for this weekend until November 30, potentially pointing to a discord within the group about production levels, quotas and compliance, and with that reduced expectations the group will be able to intervene and arrest the latest slide.
Weekly COT update: Crude selling slows; grains in demand
Key points
- Crude oil trades lower after OPEC+ was forced to delay its upcoming amid a brewing discord
- A repeat of the 2020 price war between Russia and Saudi Arabia seems extremely unlikely
- Brent resistance at $82.40, the 200-day MA with $74, the 200-week MA providing solid support
Crude oil prices remain under pressure with the latest weakness being triggered by OPEC’s decision to delay the meeting originally planned for this weekend until November 30, potentially pointing to a discord within the group about production levels, quotas and compliance, and with that reduced expectations the group will be able to intervene and arrest the latest slide from above $90 in Brent to a recent low below $80. Saudi Arabia, having led from the front and cut production by more than 1.5 million barrels a day in 2023 will most certainly want a higher degree of compliance and potential more in terms of cuts from other members who have increased production while enjoying the higher prices achieved due to Saudi restraint.
The biggest concern but also highly unlikely development from a price stability perspective is the risk of Saudi Arabia dialling back its unilateral production cuts, a development that given the current demand softness and rising non-OPEC production would bring back memories of what happened to oil prices during pandemic hit H1-2020, when Russia refused to join Saudi-led efforts to stem the price through production cuts. Saudi Arabia started a temporary and very ill-timed price war with Russia that saw its production jump 1.6 mb/d while Brent crude slumped below $20 a barrel. Fast forward and Saudi Arabia are once facing lower prices and little help from its 'friends' to curb production at a time where non-OPEC supply in the coming two years look set to outpace growth in global demand, thereby forcing restraint from OPEC in order to protect prices.
While the temperature ahead of the meeting has been raised significantly, none of the producers will risk a public discord potentially sending prices even lower, and with that in mind we expect an agreement will be reached, mostly focusing on compliance to quotas and accountability on reported baseline capacity. While Saudi Arabia is likely to extend its current unilateral production cuts until the end of Q2 next year, they are most likely not willing to make any additional cuts, so much will depend on the behaviour of members like Iran who have been flooding the market with oil from increased production and from storage, and Russia who have struggled to deliver their promised cut. The UAE is potential another point of contention given their plans to raise production next year at the expense of African producers, Angola and Nigeria, who have been forced to accept lower quotas after not reaching their levels for many months.
Latest Market Insights
Quarterly Outlook
-
-
Quarterly Outlook
Equity Outlook: Will lower rates lift all boats in equities?
Peter Garnry
Chief Investment Strategist
After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto... -
Quarterly Outlook
FX Outlook: USD in limbo amid political and policy jitters
Charu Chanana
Chief Investment Strategist
As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ... -
Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c... -
Quarterly Outlook
Commodity Outlook: Gold and silver continue to shine bright
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
FX: Risk-on currencies to surge against havens
Charu Chanana
Chief Investment Strategist
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo... -
Quarterly Outlook
Equities: Are we blowing bubbles again
Peter Garnry
Chief Investment Strategist
Explore key trends and opportunities in European equities and electrification theme as market dynami... -
Quarterly Outlook
Macro: Sandcastle economics
Peter Garnry
Chief Investment Strategist
Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p... -
Quarterly Outlook
Bonds: What to do until inflation stabilises
Althea Spinozzi
Head of Fixed Income Strategy
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ... -
Quarterly Outlook
Commodities: Energy and grains in focus as metals pause
Ole Hansen
Head of Commodity Strategy
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
Disclaimer