The Organization of Petroleum Exporting Countries and its allies managed to reach a compromise about output levels from January. Some members were insisting that OPEC should not increase production as planned from the beginning of next year due to the still comparatively low demand for oil. Others wanted to benefit from the price increase observed in the past few weeks, riding on optimism about the end of the coronavirus pandemic thanks to several working vaccines.
In the end, the two camps met somewhere in the middle. They agreed to increase production but only slightly so - by 500,000 barrels. This is a much more modest bump than feared, which is helping oil prices remain at their highest levels for this year. American oil futures increased to $46.23, while the Brent crude reached $49.86 per barrel.
Today the economic calendar will be quite loaded with events. Canada will publish its reports on retail sales, employment change, and the official unemployment rate for November. The United States is also publishing unemployment data, together with non-farming payrolls and several earnings reports.
The US unemployment publication is of special interest because yesterday’s jobless claims were better than anticipated, showing that fewer Americans lost their jobs compared to the forecasts.
Meanwhile, Congress is once again working on a stimulus bill, albeit one that is worth much less than the markets have hoped for. Senate Majority Leader Mitch McConnell has proven to be the biggest obstacle to stimulus legislation this year. However, he stated that he might be open to a compromise on the $908 bipartisan bill endorsed by House and Senate Democrats, as well as President-elect Joe Biden.
US stock markets are rallying on the prospect of more imminent stimulus. All major indices are making gains again, extending the optimism about an economic recovery in the United States.
Risk appetite among investors remains high, despite the likelihood of more lockdowns in the United States. The country is wrestling with the worst coronavirus outbreak in the world, having had over 14.5 million Covid-19 infections and more than 280,000 deaths. Yesterday it declared its highest daily increase in infections - 218,576. The CDC had previously expressed a concern that we could see a sharp spike in the case numbers after the Thanksgiving holidays, which now appears to be true.
