Originally published by Rivkin Securities
Oil prices jumped on Monday as both Saudi Arabian and Russian officials stated that they had agreed to extend production cuts for nine months through until March 2018 to help rebalance a supply glut. The first chart below shows the reaction in oil, with both WTI and Brent crude gaining +2.11% and +1.93% respectively, with the previous consensus being that production cuts would be extended for six months. So far the rhetoric from OPEC officials has succeeded in pushing prices higher, at least in the near-term with prices up over 11% since the May 5th lows. However the pressure is now on officials to deliver on these pledges at a meeting of oil producing nations on May 25th.
Any agreement will undoubtedly be positive for prices, however as we have seen over the past six months, rising U.S. production and record inventories have kept upside limited and a nine month extension at this stage is unlikely to break that.
In the US the S&P 500 closed at a new all-time high to break above the 2,400 level to close at 2,402.32 or up +0.48% for the session with broad based buying as 407 out of the 505 securities that comprises the index advancing. The Nasdaq 100 also closed at a new all-time high of 5,704.48 or up +0.31% while the US Dollar Index fell -0.38%.
In Europe the euro gained +0.41% as French President Emmanuel Macron appointed Edouard Philippe as Prime Minister. Philippe is a moderate from the Republican Party who is seen as further strengthening Macrons position ahead of the June 11th legislative elections as Macron seeks to bridge the divide between the left and right in France. Also supporting the Euro was a separate meeting with German Chancellor Angela Merkel on Monday, where Macron and Merkel agree to draw up a plan for furthering the European Union integration and strengthening the EU position ahead of key Brexit negotiations.
Locally the S&P/ASX 200 reversed initial declines to close modestly in positive territory, up +0.03% and this morning we can expect to take a positive lead from Wall St. overnight with ASX SPI200 futures up +17 points or +0.29% in overnight trading.
Data releases:
· Reserve Bank of Australia Minutes 11:30am AEDT
· BOJ Governor Kuroda Speaks 2:55pm AEDT
· UK Consumer Price Index (MoM & YoY Apr) 6:30pm AEDT
· Euro-zone GDP (QoQ & YoY Q1) 7:00pm AEDT
· Euro-zone ZEW Economic Sentiment Survey (MoM May) 7:00pm AEDT
Chart 1 - Brent (Blue) & WTI (Purple) Crude Oil
Source: Rivkin, RivkinTrader