-Saudi Arabia may be dropping hints.
-The pandemic is catching up with the US economy.
A rapid-response call from Saudi Arabia, the de facto leader of OPEC, could only pull crude oil prices into positive territory so much on Tuesday given the barrage of negative news on the wires. We didn’t get much from OPEC’s meeting today, but at this point, the expectation that production will at worse stay where it is now may be already baked in to the market. In the United States, reality came through in the form of weak retail sales figures. From the Fed, we find they’re just about out of ammo. And in the Middle East and Africa, conflict, both real and potential, is rearing its head.
After lingering around in negative territory for much of the trading day, Brent crude oil was moving just a smidge to the positive side by mid-afternoon. With OPEC chatter largely over, the price for Brent crude oil was up 0.2% as of 2:45 p.m. ET to trade at $43.91 per barrel.
OPEC Secretary General Mohammad Barkindo on Tuesday said China remains the only game in town by recording positive growth. For the rest of the world, however, the strains of the pandemic are becoming worse by the day. The outlook for global oil demand this year turned remarkably south and sits some 11 million barrel per day less that what was expected when we started the year.
“The global economic growth forecast remains at a negative -4.3% in 2020, which stands in stark contrast to the positive 3.1% envisaged at the start of the year, a staggering drop of 7.4%,” he said in a statement.
Apart from announcements emphasizing compliance with coordinated production cuts, there were few clues about what the group has planned for next year. According to Reuters, curtailment architect Saudi Arabia has called for flexibility as it tries out a narrative for tighter production controls next year. With Libyan production accelerating and US rig counts on the rise, OPEC+ might have its work cut out for it in 2021.
In the United States, still the world’s leading economy – and unfortunate leader in COVID-19 too – the situation is getting dire. After increasing some 1.6% in September, retail sales in the US economy rose only 0.3% in October, the lowest level gain since May. October levels were less than expected and raised concerns for some market watchers.
“The fact that the retail sales were a little weaker in October reinforces the idea that if the pandemic gets worse and there’s more shutdowns and restrictions, that the November data, which we haven’t gotten yet, will be even softer,” former Federal Reserve Bank of New York President William Dudley said on Bloomberg Television.
Fed Chair Jerome Powell again asked for more fiscal support from US lawmakers still distracted by an election that happened nearly three weeks ago. With the pandemic raging across the country, Powell said economic recovery has a “long way to go.”
We, along with many others watching the US political circus drag on, have wondered what a lame-duck President Donald Trump will do in his remaining days in office. On Monday, he took steps to open up parts of an Alaska wilderness area up to drillers, though its up for debate whether any leases will take shape before his term is up. On Tuesday, he announced troop withdrawals from Afghanistan and Iraq, making good on pledges to bring long-running wars to an end. Superpowers don’t do windows, but they still have obligations to protect national security interests. From oil to Iran and the Taliban, those US interests still run deep in the region. Ceding ground may end long-running wars, but it does little to protect what’s left of US influence on the global stage. Someone else will be sure to pick up the gauntlet, campaign pledge or not.
And the conflict in Ethiopia has caught our attention. Oil, gas and related infrastructure are sparse in the area, thought its location near the mouth of the Red Sea and conflict-prone areas like Somalia and Yemen certainly open the country up to being an emerging geopolitical risk factor.
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