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WEEK AHEAD: NOVEMBER 30

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Crude oil has had a massive November, gaining a third in value. This week oil cartel OPEC+ decides oil quotas at its semi-annual meeting. I discuss the outlook for oil and also rundown highlights from the economic calendar. Thanks! Rich

Video Script

Will OPEC affect the oil price? - THE WEEK AHEAD (Nov 30-Dec 4, 2020)


Hi everyone, I’m previewing the week ahead in markets and I’m putting an extra emphasis on the oil price which has been soaring this month after getting trounced for most of the year - ahead of the OPEC meeting this week. I will also rundown this week’s economic calendar – which includes the November non-farm payrolls report.

So in my opinion oil is one of the best markets for trading because of the huge price moves and trending markets you can regularly find. But of course oil is hugely important for our daily lives- and let me tell you – we consume a lot of it. How much? The world consumes an Olympic swimming pools’ worth every two minutes – or 637 swimming pools worth every day! Not sure I’d fancy a swim in one of those though.

If you liked that mad fact on oil, please click the like button - it really helps us spread the word about these videos!

Moving swiftly on to the economic calendar this week. We start with retail trade data from Japan, which is followed up by a series of China PMIs for November, all of which are expected to see a modest pullback. It’s a busy Tuesday: The RBA sets Australian interest rates, Switzerland release GDP data, there is Eurozone CPI and the Fed’s Powell testifies. Wednesday we have Australian GDP and US ADP unemployment. Thursday there is the US ISM services PMI. And Friday is the big one with the monthly US jobs report, where just over half a million jobs are forecast to have been added back into the US economy.

So in case you hadn’t noticed, oil is having a very good November. It has gained a third of its value in November alone and it added 10% in one five-day stretch. Before the recent gains, oil had been trading sideways since crashing and rebounding in the first half of the year. Now the breakout has finally happened – and it went to the upside. The research team described the situation with oil very well in last Wednesday’s daily market update, saying “Constrained supply alongside renewed economic optimism after the election and vaccine news has spurred a big short-covering rally for oil prices.”

On Monday it’s all about how these constrained oil supplies will be affected by the output decision of OPEC plus – a cartel of the world’s biggest oil producers. The plan had been to raise production by 2 million barrels per day in January after deep cuts this year. However, due to the second wave of covid-19, it is expected that the group will delay this by 3 months. 

As we know, higher supply – all else being equal – leads to a lower price. So if the group does press ahead with planned output hikes in January that is a negative force on the oil price, whereas delaying the hikes should be oil-positive. But there is more going on than just the decision on output. Whether the group can even make a decision is more crucial.

OPEC and its allies are trying to strike a tricky balance of helping rebalance the oil market after a demand shock and increasing market. This is increasingly a tough line to walk and already Qatar has quit the group and there are rumours that the UAE could quit too. No decision- or very obvious signs of discontent - would undermine the perceived power of the group - and is a big downside risk for oil.

Right thanks everyone, good luck trading this week and make sure to subscribe to our channel so you don’t miss the next video.
 

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