In Anticipation of OPEC, Analyzing Figures from ADP

1 jul 2021

One of the key events for the financial markets in general and without a doubt the key event for the oil market in particular is the OPEC + meeting. As usual, everything is extremely vague and the intrigue drags on to the last: first of all, there is a postponement of the meeting of the Monitoring Committee.

Let us recall the background. Last spring, OPEC + artificially reduced the supply on the oil market by 9.7 million bbl / d. The goal is market balancing. And it should be noted that they achieved their goal and even overdid it: now the oil market has a deficit of about 3 million bbl / d. The fact of the deficit is also confirmed by the constantly decreasing oil reserves in the United States.

In this light, and taking into account the recovery of the economies of the leading countries of the world, it is logical to expect an increase in supply from OPEC +. In fact, the markets are forecasting an increase in production in August by another 0.5 million b / d.

It would seem that one can put at least three dots in this question. But in fact there is a question mark, because there is an Indian strain that introduces an element of uncertainty. Options for the development of the event: the supply increases by at least 0.5 million b / d - the signal is bearish by definition and oil is worth selling. The offer is left unchanged - the signal is exclusively bullish and a reason for further growth in oil.

Among other news yesterday, it is worth noting the data on the US labor market from ADP. This statistics is traditionally published on the eve of the main data set on the US labor market on Friday, which includes the NFP. But we will talk about NFP tomorrow, and today we note that the numbers from ADP came out better than forecasted (+ 692K against the forecast of + 600K) and set us up for a positive. But buyers in the stock market are better off not being too happy, since such figures tell the Fed that everything is in order with economic development and the Central Bank can focus on the problem of inflation. And this almost automatically means a tightening of monetary policy. So we buy the dollar and sell it in the US stock market.