Commodities tumbled following OPEC
The OPEC cartel decided yesterday to lift the output limit to 30 mbd, causing a price of oil to plummet after it resisted downward pressure for so long. While this does not mean the OPEC will pump more and one might say the cartel merely sanctioned a current situation (OPEC countries produced slightly more than 30 mbd in November) the decision still shows two things:
- OPEC is worried about the impact of costly oil on the global economy and would be willing to cut fat margins now to preserve them in the future (and slow the development of energy-saving and alternate energy projects)
- OPEC countries are actually free to pump as much as they want and it is likely that unless the oil price declines materially, Saudi Arabia might maintain current output even if a supply from Libya returns to the market
The price of Brent – while resistant to the global slowdown has still declined somewhat since April. Now the question is how many speculators sitting on long positions will decide to close their trades. The nearest support for the price is at 99,25 USD, however a medium term target for the bears is at 90 USD.
A decline on the oil market provided an additional fuel for the bears on the gold market. After a support zone of 1605-1620 didn’t stop the sellers, the price sunk to 1560 USD per ounce. One should notice that a support at 1533 USD intersects with a long-term trend line that has been honored by the market since Oct’10. Should the market move below it, it would be a strong signal for a change in a trend.
Chinese PMI inches up
Chinese PMI offered some relief for investors as it rose to 49 pts. from 47,7 pts. in November. The data is slightly optimistic. While the index is below 50 pts. for the fight month within the last six months, clearly pointing at some slowdown, it didn’t get worse and it would be the last things bulls wanted to see. With activity softening but not collapsing there might be a hope that Chinese government might be able to stimulate the economy with lower taxes and less restrictive monetary policy.
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Przemysław Kwiecień PhD, Chief Economist |
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