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WTI futures declined once again overnight, falling to a one-week low of $44.82 per barrel (bbl) and flatlined just above $45.00/bbl into Asia morning. This will be a tough market to navigate in the day and not one for the faint-hearted as the outlook of a deal remains clouded. A day ahead of the meeting, countries from Indonesia to Iran reflected the difficulties in resolving the differences for a deal to be established.
Prices had also remained unmoved despite the API report showing a higher-than-expected drawdown in US crude oil inventories, focusing solely on the OPEC meeting ahead.
Reiterating our take on the path of prices, should the outcome of the meeting point to an upset result, prices could plunge towards the $40/bbl support level. The dip would also encapsulate the market’s disappointment in OPEC for failing to reach a consensus despite having laid the foundation for an OPEC cut in the Algiers meeting.
Meanwhile the USD index surged overnight on better-than-expected US data. US Q3 GDP was revised up to 3.2% QoQ from 2.9% QoQ previously while the November consumer confidence index surged to a fresh nine-year high of 107.10, above the market’s expectation of 101.50. The dollar index briefly rose to 101.64 before retracing some the gains to consolidate around 101.00 into Wednesday.
Mixed leads are in for Asian markets after the US equity indices packed on some gains despite pressure from the energy sector.
Specifically for Japan, October’s industrial production came in slightly higher than expected at 0.1% MoM, but sustained the downward trajectory from September’s 0.6% MoM and August’s 1.3% MoM. In YoY terms, industrial production has returned to negative territory at -1.3% YoY after two positive prints. This weighed on the Japanese market, briefly sending USDJPY a tad lower and causing the Nikkei to retrace all its gains, leaving it in the red (00:30GMT). Nevertheless, fluctuations in the Nikkei will likely be dictated by USD/JPY movements which could sustain in the consolidation phase ahead of the OPEC meeting.
On the reverse, South Korea’s October industrial production slowed to -1.6% YoY, below the market expectation of -1.3% YoY. The day ahead will be lined with more production data and trade data from Thailand while Japan’s housing starts will also be due midday. Notably, India’s Q3 GDP will also be released in the evening, but expect the OPEC meeting to be the main mover for the day ahead and the impact to be highly significant for Asian oil producers, Malaysia and Indonesia.