Crude Oil Pulls Back On Monday As Saudi Arabia Skips Meeting With Russia Before OPEC Meeting; A Closer Look Of The Week Ahead

U.S. stock futures are pointing to a lower open and crude oil has pulled back on Monday with oil traders showing increasing skepticism that a deal to cut oil production levels will be reached during a Wednesday OPEC meeting in Vienna, Austria.

Last Friday Brent crude dropped 3.6 percent after Saudi Arabia informed other OPEC members that they won’t be attending a meeting on Monday with other non-OPEC members such as Russia aimed at coordinating production cuts.

Saudi Arabia’s energy minister Khalid al-Falih confirmed on Sunday that Saudi Arabia won’t be attending the planned Monday meeting with non-OPEC members ahead of Wednesday’s closely watched OPEC meeting.

A coordinated production cut between OPEC and non-OPEC members could become the primary catalyst that helps to boost crude oil prices closer to $60.00 a barrel and also help U.S. shale production which was hard hit in 2016 due to the sharp decline in crude oil prices as a result of over-supply.

Brent crude is currently trading Monday morning at $45.53 a barrel (-1.13 percent).

According to a November 8th short-term outlook from the U.S. Energy Information Administration (EIA), Brent crude oil prices will average close to $48 a barrel in the fourth quarter of 2016 and during the first quarter of 2017.

Forecast Brent prices average is $43 a barrel for 2016 and $51 a barrel in 2017.

Dollar Weakens On Monday

The dollar has weakened on Monday against the euro which is currently trading at 1.0659, up from 1.0591 at the open.

Last week, the euro weakened to the lowest level in 14 years against the U.S. dollar.

The dollar’s strength last week underscored strong U.S. economic data, a so called Trump rally, and rising expectations the U.S. Federal Reserve will raise rates during their next December policy meeting.

According to a November 2016 outlook from Citi, the monetary policy from the European Central Bank (ECB) may be more accommodative than the U.S., which may undermine the euro.

Citi wrote that for the coming 0-3 months, the euro may drop to 1.05.

According to their “most bearish outlook” Citi analysts expect the euro may drop to 0.98 for the coming 6-12 months due in large part to accommodative policies from the European Central Bank (ECB) relative to the U.S. Federal Reserve with Italian debt serving as their largest relative underweight position.

Busy U.S. Economic Calendar This Week

Besides closely watching the outcome of the OPEC meeting on Wednesday, investors will also be paying close attention to a plethora of U.S. economic data that will come into focus this week.

On Tuesday the 2nd estimate of Q3 U.S. GDP will be reported.

Economists from have a consensus estimate that U.S. GDP increased to 3.0 percent in their 2nd estimate, up slightly from 2.9 percent in the first estimate.

Consumer confidence for November is due on Tuesday as is the Case-Shiller 20-city Index for September.

On Wednesday, the Federal Reserve’s preferred inflation gauge, PCE, will be released alongside the November ADP jobs report (private sector),  Pending Home sales for October, the Fed’s Beige Book for November, and Chicago PMI.

On Thursday, Initial and Weekly Claims is reported along with Construction Spending for October, ISM Index for November, and Auto/Truck Sales (November).

On Friday the closely watched November non-farm payroll report will come into view from the U.S. Bureau of Labor Statistics.

Economists from have a consensus estimate of 180,000 non-farm payroll jobs in November.

In October the U.S. economy added 161,000 non-farm payroll jobs.

Written By:

John Schweitzer





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