Last week proved difficult for energy prices in U.S. dollars, with WTI, Brent and diesel prices dropping 3.9%, 3.8% and 0.7%, respectively, on the week.
- OPEC’s decision, announced on Friday, did little to support energy prices since the cartel opted to raise its production quota by 1.5 million barrels per day, to 31.5 million bpd.
- The decision was in large part due to the following factors:
- Indonesia (which has an output of 740K bpd) rejoined the cartel
- OPEC’s actual output in November was 32.1 million bpd, already above the existing quotas
- Saudi Arabia is standing firm on maintaining its current market share
- The situation of cartel members such as Algeria, Venezuela and Angola is more complicated. Significant differences of opinion were evident in the cartel, with Venezuela’s President Nicolas Maduro saying once again, on a national radio program, that his country, which is on the verge of bankruptcy, hoped “that all member countries will respect OPEC’s production ceiling” and that Venezuela would push for a 5% cut in output.
- The U.S. employment figures, released on Friday, showed that 211K jobs were created in November and that the unemployment rate was unchanged at 5%. These conditions should allow the U.S. Federal Reserve (the Fed) to raise rates at its last meeting of the year, on December 16, 2015. This could be the first increase in the federal funds rate in close to 10 years. The U.S. economy has clearly recovered from the financial crisis and remains the driver of the global economy.
Have a good week!
Philippe Shebib