Both Saudi Arabia and Russia are willing to cut oil production only if all countries follow through. This means that it will be up to the US to make a critical decision. We believe that Trump will likely be pressured by its US shale producers to cut production. Long WTI/USD?

  • OPEC members will be meeting tonight at 10.30 pm (GMT+8) to discuss a possible production cut.
  • This is after Russia and Saudi Arabia engaged in an all-out price war by increasing their production amidst a collapse in demand due to the Covid-19 pandemic.
  • On Wednesday, Russia was reportedly willing to cut its output by 1.6 million barrels a day, or about 15% of its total production.
  • Both Russia and Saudi Arabia have made it clear that they will only cut oil production if all major oil producers do so as well.
  • All eyes will be on the US whose shale producers have been extracting a near-record 13 million barrels a day on the final week of March.
  • We believe that Trump will be pressured by his administration to abide by the production cut – as this would boost his approval rating in the November election.
  • Next, the US jobless claims will be out tonight and the market is expecting the jobless claims to hit 5 million. The market previously ignored US jobless claims with US stock futures continued to move higher.
  • The US labour force has around 164 million people, with 5 million jobless claims makes up about 3% of the overall labour force. Keep in mind that this is a weekly data. If the pandemic lasts for another 3-6 months, the jobless claims may easily hit 50%.
  • With this in mind, we will most likely see another round of stimulus package from the Trump administration.
  • This will in turn force the Trump administration to play ball when OPEC requires the US to cut oil production alongside with the rest of the top producers.
  • WTI/USD can move higher towards USD36 if a production cut is agreed tonight.
Sneak Peek: All Eyes on OPEC Meeting and US Unemployment Claims

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Fullerton Markets Research Team

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