OPEC’s meddling with the market extends the line where supply ends and demand begins. If the Oil market can be called a place where there is a conditional parity of interests of buyers and sellers, the pace of turning to renewable sources and energy diversification doom exporters to the slave position. This became clear with the statement of the Brazilian Minister of Energy Paulo Pedrosa, who said that the country is ready to participate in Oil market fight and push production to the limit, as long as demand structure for energy still consists mostly of oil products.
“The deficit of stones did not cause the end of the Stone Age. Same with the oil – it will come to an end, not because of a shortage of oil, – he said. – Now everyone is rushing to extract the maximum from the dependence of demand on hydrocarbons, because in the future they may lose value. ”
In the meantime, the IEA tries not to show it. The agency predicts that supply and demand will remain largely balanced next year, as rising demand in the near future will help reduce the three-year surplus, which eliminates the supply of additional barrels. Provided there are no surprises from the weather, three out of four quarters the market will remain in a state of equilibrium. The increase in production at 800K barrels in the first quarter will require an unyielding position of OPEC on the issue of strict compliance with OPEC + agreements.
The Dollar returns to the growth trajectory after a short sellout on Wednesday, as the minutes of Fed’s September meeting, pointed to the ongoing debate of officials about the third rate hike. Nothing new was reported, but the discussion created the impression that the determination of Yellen and Williams would meet with more resistance from the rest of the committee than expected. The chances for the increase have decreased from 87.8% to 81.7%.
The Dollar trades near the level of 93.00, but the pressure of the European currency is growing before the October statement of the ECB. The tangle of political problems in Spain is gradually unwinding and looks less troubling, which is also positive for the Euro.
USD/JPY is kept at bay today against the backdrop of geopolitical calm and the success of Abe leader in retaining power in his hands. Local media reported that the ruling party managed to keep 2/3 of the seats in the lower house following the results of the vote. This arrangement allows us to hope that the government will continue to pursue intensive stimulation of the economy while maintaining high growth rates of money supply and pushing Yen lower.