Oil futures rebounded after the drop on Monday, on the news that the Doha meeting ended without positive results for the Oil market. Traders quickly shrugged off the of Oil producing nations resuming the fight for their market share, building up bullish wagers. It reflects the fact that the Qatar summit had only a short-lived impact. Texas benchmark pared down its Monday losses, gaining 0.63% to 41.45, while Brent rallied by 1.03% to 43.34
The reason why the failure of the Doha meeting couldn’t throw the market into turmoil is understanding of the agreement Oil producers tried to reach – proposed levels of production freeze were very high, for Saudi Arabia and Russia it was somewhere near historical peaks of 10.5-11M barrels. Basically, trying to engage Iran into the pact Saudi Arabia wanted to play a safe bet, working out the oversupply issue while barring the recovery of its main rival in the Islamic world. Having accepting the terms, Iran would have been the only loser in the agreement, that’s why the country didn’t even send a representative to the meeting, expressing its resentment with the OPEC’s offer. Freezing Oil output without Iran’s participation wouldn’t help much to curb oversupply, though.
Now, the main threat for the market is the possible boost of production by Saudi Arabia and Russia. Saudi Prince said on Monday that drilling capacities allow the Kingdom to boost production by 1M barrels next day to 11.5M barrels and add another 1M barrels in the next 6-9 months. A Russian Energy department official also said that lifting up production targets in 2016 is “quite possible”, hinting that Russia is ready for another round of decline on the energy market.
Today’s rally on the Oil market is associated with a strike of oilmen in Kuwait, which caused a 60% temporary drop in production, as well as positive expectations on the halting shale boom in the US, which signals that OPEC’s primary market opponent is about to capitulate.
European shares extend Monday’s gains, as commodities propped up the energy shares and spurred appetite for risky assets, DAX gained 2.24%, FTSE 100 grew by 0.67%, Euro Stoxx 50 added 1.65%, CAC 40 increased by 1.30%. IBEX 35 grew by 0.98%. Asian shares also rally on the declining Yen, Nikkei 225 surged by 3.68%, TOPIX gained 3.25%, Hang Seng advances by 1.30%. Chinese composite index CSI 300 extend gains moderately, local investors increase stock positions using leverage.
The Yen weakens, as traders drop safe havens today, USD/JPY advances by 0.51% to 109.38, GBP/USD adds 0.64% to 1.4370, AUD, CAD and the Rouble rises against the USD, boosted by Oil gains, USD/CHF declines by 0.12%. The Euro gains 0.19% against the Dollar to 1.1334. The US Dollar index declines by 0.15%.
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