Nov. 26, 2016 (Commerzbank AG) – OPEC meeting in Vienna – more ado about nothing
At next week’s OPEC meeting in Vienna, the oil producers will probably agree on output cuts. But it is questionable whether these will be implemented. We assume that the battle for market shares will continue unabated and the oil market will remain oversupplied. The oil price should therefore see only small gains in the coming year.
Outlook for the week of 28 November to 2 December 2016
- Economic data: Next week’s forthcoming US economic data are likely to confirm that the Fed’s targets are coming closer within reach, substantiating expectations of a December Fed hike.
- Bond market: The significant decoupling between Bund and US Treasury yields should persist driven by a diverging fundamental outlook and a shortage of Bunds. Furthermore, political risks ahead of the Italian referendum should continue to support Bunds.
- FX market: The US dollar has risen further this week. Since the US presidential election, the USD index (DXY) has gained more than 3.5%. At the moment, there is much to suggest from a fundamental perspective that the dollar will be able to sustain its current level.
- Equity market: Expected DAX EPS 2017 growth appears too high against a backdrop of numerous adverse trends. We look for 2017 EPS downgrades of 5% in the coming quarters.
- Commodity market: By finalising the production cut, OPEC will likely assuage concerns about massive near-term market oversupply. With many speculators having short positions, the oil price would then be likely to rise. But we remain sceptical regarding the medium-term outlook.