OPEC+ to cut oil production by 2 million barrels per day to shore up prices, defying U.S. pressure

• OPEC and non-OPEC partners on Wednesday agreed to impose deep output cuts, seeking to spur a recovery in oil prices despite U.S. pressure to pump more.
• Crude prices have fallen to roughly $80 a barrel from more than $120 in early June amid growing fears about the prospect of a global economic recession.

A group of some of the world’s most powerful oil producers on Wednesday agreed to impose deep output cuts, seeking to spur a recovery in crude prices despite calls from the U.S. to pump more to help the global economy.

OPEC and non-OPEC allies, a group often referred to as OPEC+, decided at their first face-to-face gathering in Vienna since 2020 to reduce production by 2 million barrels per day from November.

https://www.cnbc.com/2022/10/05/oil-opec-imposes-deep-production-cuts-in-a-bid-to-shore-up-prices.html

ENERGY

Oil prices edge higher ahead of OPEC+ meeting to discuss supply cuts

Oil prices edged up on Tuesday as expectations that OPEC+ may agree to a large cut in crude output when it meets on Wednesday outweighed concerns about the global economy.

Brent crude futures rose $1.80, or 2.03%, to $90.67 per barrel after gaining more than 4% in the previous session.

Stocks were crushed in September. Here’s what’s coming next, according to Wall Street pros

The best-performing global stocks last week include a gold miner analysts say could jump 50%

Weizhen Tan

A DAY AGO

U.S. crude futures rose by $1.66, or 1.98%, to $85.25 a barrel. The benchmark gained more than 5% in the previous session, its largest daily gain since May.

Oil prices rallied on Monday on renewed concerns about supply tightness. Investors expect the Organization of the Petroleum Exporting Countries and its allies, known collectively as OPEC+, will cut output by more than 1 million barrels per day at their first in-person meeting since 2020 on Wednesday.

Voluntary cuts by individual members could come on top of this, making it their largest cut since the start of the Covid-19 pandemic, OPEC sources said.

“Despite everything going on with the war in Ukraine, OPEC+ has never been this strong and they will do whatever it takes to make sure prices are supported here,” said Edward Moya, a senior analyst with OANDA, in a note.

OPEC+ has boosted output this year after record cuts put in place in 2020 due to demand destruction caused by the Covid-19 pandemic. But in recent months, the organization has failed to meet its planned output increases, missing in August by 3.6 million bpd.

“Whilst OPEC+ might announce a large cut [in excess of 1 million bpd], in reality, the cut could be much smaller. This is due to most OPEC+ members producing well below their target production levels,” ING analysts said in a note.

The production cut being considered was justified by the sharp decline in oil prices from recent highs, said Goldman Sachs, adding that this reinforced its bullish oil view.

Concerns about the global economy could cap the upside, said Tina Teng, an analyst at CMC Markets, as investors also look to take profit on gains made in the previous session.

“Uncertainties remain in the global markets, such as bond market turmoil, the sell-off in risk assets, and a skyrocketing U.S. dollar,” said Teng.

Oil prices have dropped for four straight months as Covid-19 lockdowns in top oil importer China curbed demand while interest rate hikes and a soaring U.S. dollar pressured global financial markets. Major central banks have embarked on the most aggressive round of rate rises in decades, sparking fears of a global economic slowdown.

U.S. crude oil stocks were estimated to have increased by around 2 million barrels in the week to Sept. 30, a preliminary Reuters poll showed on Monday.

LIVE UPDATES

UPDATED TUE, OCT 4 202210:41 AM EDT

SHAREShare Article via FacebookShare Article via TwitterShare Article via LinkedInShare Article via Email

Stocks roar back from 2022 low, S&P 500 on track for best 2-day gain in 2 years

Stocks surged Tuesday as Wall Street built on a sharp rally seen in the previous session.

The Dow Jones Industrial Average rose 731 points, or 2.5%. The S&P 500 added 2.7%, and the Nasdaq Composite was up 3.1%.

Tuesday’s gains put the S&P 500 up 5.1% for the week and on track for its best two-day rally since March 2020.

Markets have had a strong start to the month, bringing a respite from the swift declines seen September and the prior quarter. On Monday, the Dow jumped about 765 points for best day since June 24. The S&P 500 advanced about 2.6% in its biggest one-day since July 27, and the Nasdaq added 2.3%.

“After falling more than 9% in September and extending its year-to-date decline to nearly 25% as of Friday’s close, we think the S&P 500 was looking oversold,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “In addition, some of last week’s selling pressure may have been driven by quarter-end rebalancing, which has now ended.”

“With sentiment toward equities already very weak, periodic rebounds are to be expected,” he added. “But markets are likely to stay volatile in the near term, driven primarily by expectations around inflation and policy rates.”

Sentiment has improved these past two session as Treasury yields come off more-than 10-year highs. The 10-year Treasury yield traded at about 3.615% on Tuesday, down from more than 4% at one point last week. Earlier in the day it briefly broke below 3.6%.

Sentiment on Tuesday also got a boost as shares of Credit Suisse traded 4% higher. Earlier in the week there were concerns regarding the bank’s financial health. The bank told CNBC it would provide updates to its strategy alongside its third-quarter numbers.

Stocks extended their advance following job openings data pointing to a weakening in the labor market, leading some traders to bet the Fed could back off its aggressive tightening campaign sooner than expected.

Job openings plunged by more than 1.1 million in August

The level of job openings plunged by more than a million in August, providing a potential early sign that the massive U.S. labor gap is beginning to close.

Available positions totaled 10.05 million for the month, a 10% drop from the 11.17 million reported in July, according to a Bureau of Labor Statistics release Tuesday. That was also well below the 11.1 million FactSet estimate.

The number of hires rose slightly, while total separations jumped by 182,000. Quits, or those who left their jobs voluntarily, rose by 100,000 for the month to 4.16 million.

The job openings numbers are watched closely by the Federal Reserve, which is trying to reverse runaway inflation.

One primary area of interest for the central bank has been the ultra-tight labor market, which had been showing about two job openings for every available worker. That ratio contracted to 1.67 to 1 in August.

This is breaking news. Please check back here for updates.

JOLTS August 2022: (cnbc.com)

LNG Canada, country’s $40-billion ‘second chance’ at becoming a global LNG leader, takes shape

On a drizzly stretch of B.C. coastline at the head of the Douglas Channel, Canada’s first natural gas export terminal is taking shape.

The sprawling site on the traditional territory of the Haisla Nation teems with more than 5,000 construction and trades workers, working around the clock to bring the $40-billion Shell Plc.-led LNG Canada terminal to completion.

The latest piece of the puzzle: a colossal 3,000-ton Baker Hughes compressor that arrived in Kitimat by boat from Italy on Sep. 20, the first of four that will form the powerful jet engine of the terminal’s liquefaction process. Its arrival puts the project — and the country — one important step closer to seeing the first cargo of liquified natural gas depart from its shores.

Already more than 70 per cent complete, LNG Canada could be operational by the middle of the decade and promises to unlock the full economic potential of Canada’s rich gas reserves for the first time.

It’s a change that will take some adjusting to in the oilpatch. Despite being the fifth-largest supplier of natural gas in the world, Canada’s energy sector has long seen its production hemmed in by pipeline constraints and market conditions in the U.S.

Once it is operational, LNG Canada will be a major export terminal for liquified natural gas from the West Coast. Requiring a massive infrastructure lift, including the largest tank built for LNG in the world (2nd only in size to a tank built for imports in Southeast Asia) pic.twitter.com/n2B4yl8J2G— Meghan Potkins (@mpotkins) September 29, 2022

LNG Canada, country’s $40-billion ‘second chance’ at becoming a global LNG leader, takes shape (msn.com)

‘The Fed is breaking things’ – Here’s what has Wall Street on edge as risks rise around the world

• Markets entered a perilous new phase in the past week, one in which statistically unusual moves across asset classes are becoming commonplace.
• Surging volatility in what are supposed to be among the safest fixed income instruments in the world could disrupt the financial system’s plumbing, according to Mark Connors, former Credit Suisse global head of risk advisory.
• That could force the Fed to prop up the Treasury market, he said. Doing so will likely force the Fed to put a halt to its quantitative tightening program ahead of schedule.
• The other worry is that the whipsawing markets will expose the weak hands among asset managers, hedge funds and other players who may have been overleveraged or took on unwise risks. Margin calls and forced liquidations could further roil markets.

‘The Fed is breaking things’ – Here’s what has Wall Street on edge as risks rise around the world (cnbc.com)

Oil prices could soon return to $100 as OPEC+ considers ‘historic’ cut, analysts say

• OPEC and non-OPEC producers, a group often referred to as OPEC+, will meet in Vienna, Austria on Wednesday to decide on the next phase of production policy.
• The oil cartel and its allies are considering an output cut of more than a million barrels per day, according to OPEC+ sources who spoke to Reuters.
• “The OPEC ministers are not going to come to Austria for the first time in two years to do nothing. So there’s going to be a cut of some historic kind,” said Dan Pickering, CIO of Pickering Energy Partners.

An influential alliance of some of the world’s most powerful oil producers is reportedly considering their largest output cut since the start of the coronavirus pandemic this week, a historic move that energy analysts say could push oil prices back toward triple digits.

OPEC and non-OPEC producers, a group often referred to as OPEC+, will meet in Vienna, Austria, on Wednesday to decide on the next phase of production policy.

The oil cartel and its allies are considering an output cut of more than a million barrels per day, according to OPEC+ sources who spoke to Reuters.

“The OPEC ministers are not going to come to Austria for the first time in two years to do nothing. So there’s going to be a cut of some historic kind,” Dan Pickering, CIO of Pickering Energy Partners, said, referring to the group’s first in-person meeting since 2020. 

However, Pickering said he expects the actual number of barrels coming off the market will likely be around 500,000, which is “going to be enough to support the market in the near term.”

Oil prices rose around 4% on Monday morning.

International benchmark Brent crude futures popped 4% to $88.54 per barrel, while U.S. West Texas Intermediate futures climbed 4.2% to trade at $82.83 per barrel.

OPEC: Oil prices could soon return to $100 a barrel, analysts say (cnbc.com)

Stocks rally to start October and a new quarter, Dow up over 700 points

The Dow Jones Industrial Average jumped 739 points, or 2.6%. At one point it advanced as much as about 700 points. The S&P 500 rose 2.5%, after falling Friday to its lowest level since November 2020, and the Nasdaq Composite gained 2.1%.

Those moves came as the yield on the 10-year U.S. Treasury note rolled over to trade at around 3.7%, after topping 4% at one point last week.

“It’s pretty simple at this point, 10-year Treasury yield goes up, and equities likely remain under pressure,” Raymond James’ Tavis McCourt said. “It comes down, and equities rally.”

Wall Street is coming off a tough month, with the Dow and S&P 500 notching their biggest monthly losses since March 2020. The Dow on Friday also closed below below 29,000 for the first time since November 2020.

The Dow shed 8.8% in September, while the S&P 500 and Nasdaq Composite lost 9.3% and 10.5%, respectively.

For the quarter, the Dow fell 6.66% to notch a three-quarter losing streak for the first time since the third quarter of 2015. Both the S&P and Nasdaq Composite fell 5.28% and 4.11%, respectively, to finish their third consecutive negative quarter for the first time since 2009.

As the new quarter kicks off, all S&P 500 sectors sit at least 10% off their 52-week highs. Nine sectors finished the quarter in negative territory.

In the fourth quarter, elevated inflation and a Federal Reserve intent on bringing surging prices to a halt regardless of what it means for the economy will likely continue to weigh on markets, said Truist’s Keith Lerner. Oversold conditions, however, also make the market vulnerable to a sharp short-term bounce on good news, he added.

“I think we could be set up for some type of reprieve but the underlying trend at this point is still a downward trend and choppy waters to continue,” Lerner said.

Calendar: Oct 3 – Oct 7, 2022

Monday October 3

• Japan and Euro zone manufacturing PMI

• (9:30 a.m. ET) Canada’s S&P Manufacturing PMI for September.

• (10 a.m. ET) U.S. ISM manufacturing PMI for September.

• (10 a.m. ET) U.S. construction spending for August. The Street expects a month-over-month decline of 0.2 per cent.

Also: Canadian and U.S. auto sales for September.

**

Tuesday October 4

• Euro zone PPI

• (10 a.m. ET) U.S. factory orders for August. Consensus is an increase of 0.3 per cent from July.

• (10 a.m. ET) U.S. Job Openings & Labor Turnover Survey for August.

Earnings include: NovaGold Resources Inc.

**

Wednesday October 5

• Japan and Euro zone services and composite PMI

• Germany trade surplus

• (8:15 a.m. ET) U.S. ADP National Employment Report for September. The Street is estimating an increase of 200,000 jobs from August.

• (8:30 a.m. ET) Canada’s merchandise trade balance for August.

• (8:30 a.m. ET) Canadian building permits for August.

• (8:30 a.m. ET) U.S. goods and services trade deficit for August.

• (10 a.m. ET) U.S. ISM Services PMI for September.

Also: OPEC+ meeting

**

Thursday October 6

• China foreign reserves

• Euro zone retail sales

• (8:30 a.m. ET) U.S. initial jobless claims for week ended Oct. 1.

• (10 a.m. ET) Canada’s Ivey PMI for September.

• (11:35 a.m. ET) Bank of Canada governor Tiff Macklem speaks at the Halifax Chamber of Commerce.

Earnings include: Constellation Brands Inc.; McCormick & Co. Inc.; Richelieu Hardware Ltd.

**

Friday October 7

• Japan household spending

• Germany retail sales and industrial production

• (8:30 a.m. ET) Canadian employment for September. The Street expects an increase of 0.1 per cent, or 20,000 jobs, from August with the unemployment rate remaining 5.4 per cent.

• (8:30 a.m. ET) U.S. nonfarm payrolls for September. The consensus is an increase of 250,000 jobs from August with the unemployment rate staying at 3.7 per cent.

• (10 a.m. ET) U.S. wholesale inventories for August.

• (3 p.m. ET) U.S. consumer credit for August.

Earnings include: Tilray Inc.