April 9 is a big day for global markets, with the official start of today’s delayed OPEC + meeting and the focus on whether the battle between Saudi Arabia and Russia over oil prices can be resolved. At the same time, there will be “hard data” on the number of americans filing new claims for jobless benefits last week, giving a sense of the impact of the outbreak on the U.S. economy, especially given that U.S. and European markets are closed on Friday.
OPEC+ meeting coming! Mr. Trump pressed again
The price war between Saudi Arabia and Russia appears to have come to a critical juncture, with ultra-low prices leading to losses for most U.S. shale producers and prompting the White House to put pressure on Saudi Arabia and Russia to end the price war.
The White House had used the word crazy to describe the Russian and Saudi moves, calling on both countries to cut production or face retaliation, including tariffs and other sanctions.
The oil market appeared to have reached crisis point last week as commercial and political pressure grew to cut production quickly to prevent a glut of inventories and a collapse in prices.
OPEC and its Allies, including Russia, are scheduled to meet at 22:00 Beijing time on April 9 to discuss the sharp drop in global oil prices.
The meeting is widely expected to be more successful than the early march meeting. A meeting in early march failed to agree on an extension of production cuts, triggering a price war between Saudi Arabia and Russia.
Russia’s TASS news agency on Wednesday quoted an unnamed energy ministry official as saying the country was ready to cut output by 1.6 million barrels a day.
Kuwait’s al-rai newspaper reported earlier on Thursday that the country’s oil minister said the OPEC meeting was meeting with the aim of reaching an agreement to cut output by 10-15 million barrels a day.
Kuwait’s oil minister Khaled al-fadhel said in an interview with the newspaper: “after continuous consultations over the past few weeks, I confirm that our intention is to reach an agreement to reduce global production of 100 million BPD by 10 million to 15 million BPD in order to restore market balance and prevent further price declines in the future.”
Separately, OPEC President Mohamed Arkab, Algeria’s energy minister, said on Wednesday he expected a “fruitful” OPEC meeting on Thursday.
“There is no doubt that the meeting will be fruitful in order to rebalance the market through the measures we will take tomorrow,” OPEC President Mohamed Arkab told Algeria’s national news agency APS.
While OPEC sources have said the success or failure of the deal depends on U.S. participation, doubts remain about whether Washington will contribute.
In a statement Tuesday, the energy department noted that U.S. output was already falling even without government action, in line with the White House’s insistence that it not intervene in private markets.
On Wednesday, the EIA reported that U.S. crude inventories rose 15.2 million barrels in the week ended April 3, the largest weekly increase on record. U.S. refinery output fell 600,000 barrels a day to 12.4 million barrels a day. U.S. crude inventories surged last week as refiners slashed refining capacity, the EIA said, adding 6.4 million barrels to Cushing crude, the largest increase on record.
Asked about crude supplies, U.S. President Donald trump on Thursday responded that the U.S. is market-oriented and has cut production.
US President Donald trump has said he expects Russia and Saudi Arabia to resolve their oil dispute. There are “a lot of good options” if the russia-saudi dispute continues.
Several republicans in the us house of representatives are reported to have told Saudi crown prince Mohammed bin Salman on Wednesday that economic and military co-operation between the two countries would be at risk unless Saudi Arabia helped stabilise prices by cutting crude oil production.
Kim Kwang-rae, the commodities analyst at Samsung Futures in Seoul, said: “the focus of the market is still on the OPEC meeting and closely watching whether the United States joins the production cut. “The market is in a wait-and-see mode.”
The most timely hard data! The first day of the United States is coming
The market is more focused on the number of claims for unemployment benefits because it is more timely to show the impact of novel coronavirus and social containment measures in Europe and the United States on the job market.
Investors are bracing for a closely watched U.S. jobless claims report at 20:30 GMT on Thursday. Initial claims for jobless benefits are expected to be 5 million in the week ended April 4, according to a respected media survey.
New claims for state unemployment benefits rose nearly twice as fast as expected to 6.648 million in the week ended March 28, labor department data showed on Thursday.
Weekly claims have been ignored in the past but are now even more important than the monthly non-farm payrolls report. “Claims will be the most timely hard data to gauge the depth of the recession and capture the start of the recovery,” Goldman Sachs said.
JPMorgan chase recently said that almost all economies will contract in February and April as a result of the outbreak. To put that in perspective, the second quarter of this year will see an unprecedented economic slump in Europe, possibly as high as 22%, the UK economy will plunge 4.2%, the us economy will also plunge 14%, and the global economy will contract by 13.7%.
A new st. Louis federal reserve bank report says the impact of the new coronavirus could cost as many as 46 million jobs in the United States in the worst-case scenario.
Don’t forget Powell.
In addition to the key data, the market will also receive a speech from federal reserve chairman colin Powell. At 22:00 Beijing time on Thursday, Mr Powell will give a speech on the state of the us economy.
Fed officials at two emergency meetings last month became increasingly concerned that the coronavirus outbreak could quickly damage the U.S. economy and disrupt financial markets, prompting them to take “forceful action,” according to minutes released on Wednesday.
Mr Powell’s speech will be scrutinised for his stance on monetary policy.
Gold was lukewarm on the fed minutes last day, with prices hovering around $1,650 as markets focused on key evening data and Powell’s speech.
Analysts at Phillip Futures said uncertainty would continue to weigh on the market’s appetite for risk, which would be positive for gold in the long term. Avtar Sandu, senior commodities manager at the bank, said fundamentals were still positive for gold, but the short-term market would be affected by any new news.
Adrian Day, chairman of Adrian Day Asset Management, said there was no doubt that gold would go higher. “Gold will go up, but not because of the epidemic but because of the monetary policies that have been put in place to deal with it.” The global economy is expected to experience difficulties and a v-shaped reversal is unlikely, Day said. Both fed and government stimulus will eventually lead to inflation.