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The impending OPEC meeting on November 30 is poised to be a pivotal event shaping the future of global oil supply and pricing dynamics. Key discussions revolving around Saudi Arabia and Russia’s unilateral production cuts, potential output quota adjustments, and the crucial need to balance oil supply to maintain current price levels underscore the significance of this gathering. As stakeholders convene, the decisions made during this session will significantly influence the trajectory of oil markets, holding implications for global economies and energy landscapes.
Futures point higher before final November session
U.S. stock futures signal a positive tone on the last trading day of November, marking a notably favorable month for equities.
As of 04:56 ET (09:56 GMT), Dow futures climbed 144 points (0.4%), S&P 500 futures rose 6 points (0.1%), and Nasdaq 100 futures gained 26 points (0.2%).
Despite mixed performances on Wednesday, these indices are set to close the month positively. Encouraging data indicating a potential easing of inflation in the U.S. has spurred expectations of the Federal Reserve adjusting interest rates from recent highs. Consequently, Treasury yields dipped while stocks surged.
The S&P 500 soared by 8.5%, the Nasdaq Composite jumped nearly 11%, and the Dow Jones Industrial Average advanced by 7.2%, marking their strongest monthly performances since July 2022 and October 2021, respectively.
Also Read: German GDP 2023 Fell – A Detailed Economic Performance for Q3
What To Expect At OPEC Meeting
During the upcoming OPEC meeting on November 30, several critical agenda items will likely shape the future of oil supply and prices.
One primary concern revolves around the intentions of Saudi Arabia and Russia regarding the extension, expansion, or cessation of their current unilateral production cuts. If they opt to end these cuts as scheduled by December 31, 2023, it could potentially add 1.3 million barrels per day (b/d) to the global oil supply. Analysts from S&P Global Commodity Insights consider an abrupt termination of these cuts improbable due to its anticipated substantial adverse impact on prices.
Another pivotal issue, contingent on the first, involves discussions about potentially reducing the output quotas agreed upon by OPEC+ countries for the upcoming year. This measure aims to bolster oil prices, which have recently hovered around $80 per barrel for dated Brent. Adjustments to baseline calculations for quota determination, typically a contentious matter, may also be proposed based on the latest production capacity estimates.
However, the crucial factor remains that in order to maintain current oil price levels or witness an increase within the approximate range of $75-$95 per barrel observed over the last six months, OPEC Meeting must contemplate reducing supply entering 2024 compared to current levels. S&P Global Commodity Insights suggests that this necessitates cuts beyond the voluntary reductions undertaken by Russia and Saudi Arabia. These additional reductions are on top of the cuts implemented in November 2022 and May 2023, which totaled 3.7 million b/d.
Bhushan Bahree, Executive Director at S&P Global Commodity Insights, emphasized the data indicating a projected excess in total world liquids supply by 3 million b/d in the first quarter of 2024. While there might be inventory draws in Q3, the possibility of builds in Q2 and Q4 still looms. Bahree highlighted the challenge facing OPEC Meeting as the projected balances for 2024 indicate a surplus of 1.3 million b/d in liquid supply compared to demand.
PCE Data: Inflation Insights Awaited
Traders are gearing up for Thursday’s release of the October personal consumption expenditures (PCE) price index, the Federal Reserve’s favored metric for inflation.
Analysts forecast a 3.0% year-on-year figure, signaling a slowdown from September’s 3.4%. On a monthly basis, expectations suggest a 0.1% increase. The core reading, excluding volatile elements like food and fuel, anticipates a 3.5% annual and 0.2% monthly uptick.
This data carries weight in shaping the Fed’s future interest rate adjustments. While the consensus leans toward maintaining rates between 5.25% and 5.50% next month, hints from policymakers indicate a possible shift from this tight monetary policy stance. Fed Governor Christopher Waller’s recent comments suggest a potential rate cut as early as May next year if inflation continues to ease.
Also Read: China Manufacturing PMI Slows Down Again In October
Microsoft Secures OpenAI Board Seat
Following upheavals at OpenAI, Microsoft will secure a position on the board of directors, as confirmed by CEO Sam Altman’s announcement.
As a significant investor, Microsoft’s non-voting observer status in the revamped board includes prominent figures like Bret Taylor, Larry Summers, and Adam D’Angelo. The latter remains from the previous board ousted earlier this month due to controversies surrounding Altman’s removal as CEO.
Altman, a key figure in AI discussions, returns to lead OpenAI, expressing enthusiasm for Microsoft’s inclusion in the board structure.
Chinese Manufacturing Contracts Again
Chinese manufacturing faced a second consecutive month of contraction in November, primarily due to declining overseas demand.
November’s official manufacturing purchasing managers’ index (PMI) registered 49.4, falling short of expectations and contracting from the previous month’s 49.5.
With the index dipping below 50 for six out of 11 months in 2023, concerns arise about China’s economic strength. The non-manufacturing PMI at 50.2 also missed projections, hinting at broader economic challenges.
This data prompts calls for more targeted fiscal measures to stimulate growth amid a sluggish post-pandemic recovery in China.
Also Read: Australia’s CPI Up by 4.9%, Eases Inflation Pressure
Oil Prices Rise Ahead of OPEC Meeting
Oil prices saw an uptick as markets anticipated the impending OPEC meeting, previously postponed due to member disputes and weaker Chinese factory activity.
U.S. crude futures climbed 0.9% to $78.58 a barrel, while the Brent contract advanced by 0.9% to $83.62 per barrel by 04:56 ET.
The OPEC+ meeting, now scheduled for later Thursday, raises expectations of potential production cuts despite concerns about slowing growth in China. Additionally, unexpected growth in U.S. crude inventories adds complexity to market dynamics.
