OPEC Talks Pushed Back But Prices Remain Elevated
Oil prices are pulling back a little, as OPEC and its allies struggle to find agreement on production targets for next year. There were expectations that OPEC members would extend production cuts for an additional three months, but some members expressed were unhappy with that arrangement. The dispute comes as many countries combat a second wave of COVID-19, forcing severe restrictions and another hit to air travel.
Oil prices have rebounded strongly over the course of the last month as three vaccine announcements paved the way for an economic recovery next year. But also built into the recovery trade has been the expectation that OPEC+ will push back plans to increase production by 2 million barrels in January.
Those plans were made with prior forecasts in mind that haven’t come to pass. Complicating the issue though is the significant buffer that the vaccine news has afforded producers which may be the cause of the dispute.
If producers push ahead as planned, will the pullback leave crude prices at manageable levels? Will any delay offer an advantage to the U.S. shale industry and push back tough decisions by a few months? A compromise may be needed by a simple postponement may be too much to ask at this point.
The euro area PMI is still looking good, although outside of Germany we are seeing some softening in the data. As ever, Germany is the star pupil having managed the pandemic well to date and the data is continuing to reap the rewards. The country may not quite be seeing the turnaround yet that others are but it has also been far less impacted. Unemployment ticked lower in another encouraging sign for the region’s largest economy.
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