Oil bull or oil boo?

Jitters ahead of major events have briefly helped safe havens to regain some of its shine at the start of the week while oil bulls have taken to the market with their expectations. 

Source: Bloomberg

Crude oil prices were boosted overnight with Iraq’s oil minister reaffirming his intention to cooperate with all OPEC members on the agreement. WTI futures rose from $46.00/bbl levels to trade just below $47.00/bbl into Tuesday morning. The market appears to buy-in on this reaffirmation despite the fact that a production freeze is more likely than a cut at present.

While there are economic consequences, the upcoming OPEC meeting decision can largely be classified as a political event and can go either ways. The optimistic outcome is also highly likely to be undermined by this element as Iran’s oil minister noted on Monday that “politics may make OPEC decision harder”. Moreover, Monday’s meeting also yielded little progress contrary to the market’s expectations, heaping more event risks ahead of Wednesday.

Meanwhile, weak leads were seen overnight as the strong rally fizzled off in light of the eventful week. The S&P 500 index and DJIA slumped 0.53% and 0.28% respectively on Monday. The prime gainers earlier, financials and energy, were seen clocking more than 1.0%, the latter affected by the uncertainty that the OPEC meeting will bring.

The strong leads from Wall Street that had trickled into Asia earlier looks to be dry into the start of this week. Asian markets are expected to remain subdued after yesterday’s pick-up. This is especially so for the Nikkei, an early mover, down 0.3% when last checked (01:30GMT). The weakness in the index remains a result of the reversal earlier in JPY.

The fluctuation in the markets at the start of the week is no surprise and could remain the case into the end of the week when the highly awaited November US NFP data will be revealed. Not to forget, the Italian referendum will dominate headlines this weekend. The day ahead will be focused on US Q3 GDP (2nd revision) and November consumer confidence while it will be another quiet day for Asia.

Separately, Japan’s October unemployment rate came in this morning in line with expectations and unchanged from the previous month at 3.0% (sa). Overall household spending had exceeded expectations and rose to the highest level since April, albeit remaining in negative territory. Notably, Japan’s October retail trade had also surprised on the upside at -0.1% YoY, the highest figure printed since February. This marks an improvement to the spending weakness issue that plagues the country.


Yesterday: S&P 500 -0.53%; DJIA -0.28%; DAX -1.09%; FTSE -0.60%

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.