Daily analysis 30.11.2016

Higher chances for an agreement between the manufacturers of the crude oil significantly support the quotations of this raw material. Higher pricings of WTI or Brent at this moment should be favourable for the USD. The GDP data were yet again supported by the increase of the reserves.

Most important macro data (CET – Central European Time). Estimations of macro data are based on Bloomberg information, unless marked otherwise.

• 14:15 The ADP data on the employment in the USA (survey: 170 thousand)

Higher chances for agreement

The market paid a lot of attention to a potential agreement regarding lowering the oil production by OPEC in recent weeks. Comments from the members of the cartel from this morning suggest that chances for the consensus are high. Additionally, there is a growing probability of Russia joining the idea of a production cut.

Before noon, during a short meeting with the press, the minister from the OPEC countries presented their opinions on possible production cuts. The cartel representative of Arabia, Khalid Al-Falih, said that the organization wants the production to be lowered to the level of 32.5 million barrels. This is approximately 1.2 – 1.3 million less than what was presented in the data for the recent months.

It also appears that the issue with Iran, whose production will refer to the level from before sanctions were introduced, was resolved. It might mean that Tehran will have the possibility to increase production compared to the current levels of 3.7 – 3.8 million barrels a day.

Apart from capping the production by OPEC, the chances for limiting the global production by more than 1.2 million barrels a day grow as the agreement might be joined by Russia. The minister of Oil, Bijan Namdar Zanganeh, said that Russia changed its mind and is ready to lower oil production. This news was also presented by the Bloomberg agency, who quoted their own source.

The news is therefore close to the scenario laid out a few days ago by the Wall Street Journal. Consequently, it cannot be excluded that the production cap might exceed 1.5 million barrels a day, what might cause the market to turn from a rather high oversupply to a deficit of about one million barrels a day. This would be good news for oil’s quotations. Their prices could swiftly hike to the levels of 55 USD per barrel or even more.

The oil and the dollar

Theoretically speaking, the high price of the dollar should halt gains on crude oil. However, a signal from the lower supply has significantly more weight than the currency issues. As a result, both the oil and the dollar might remain at relatively high levels, taking into account the quotations of these instruments in recent years.

Additionally, the shift of the oil quotations towards 55 USD per barrel in the first quarter of 2017 could cause a noteworthy increase of US inflation due to a very short base in the analogical time the year before, as well as a strong translation of this raw material to the cost for the final recipient, as the share of the taxes in the final price is limited. Taking into consideration the fact that the market is already vulnerable to all possible increases of inflation expectations and future interest rates related to the already announced fiscal stimulation, this could be yet another factor supporting the USD in the weeks to come.

An unfavorable mixture of the GDP data

Today, the Central Statistical Office of Poland announced detailed information on economic growth. Household and public consumption noticeably sped up. On the other hand, the fall of the gross fixed capital formation, which fell by 7.7% in the 3rd quarter, was deepened. The GDP was negatively affected by the net export.

The final reading, at the level of +2.5% YoY, is still relatively high. For yet another quarter in a row, there was an increase in reserves. In the third quarter, it added 1.1 percentage points. If it weren’t for the change in the reserves, the economy would grow at the pace of 1.4 percent. Today’s data may cause a lively discussion on the possibility of interest rate cuts by the Monetary Policy Council, especially among its dovish members. Even though we don’t expect an interest rate cut, the sole consideration of such a movement may be negative for the PLN.