Last Friday, NFP data rose more than expected. The forecast of 700K fell short of the published figure of 850K. After better than expected data, the S&P 500 rose 0.8% on Friday for the seventh consecutive day. The Nasdaq, US Treasuries, and oil also did well. The dollar declined.
The new NFP figures give breathing space to the Federal Reserve, which, although it has begun talks to phase out fiscal stimulus, does not have to do so in a hurry. During the Asian session on Monday, the dollar appeared to have recovered some of its losses from Friday. According to Bloomberg, investors are awaiting Friday’s release of the Federal Open Market Committee minutes that will set out next month’s monetary policy.
Oil Production Uncertainty
Brent remained near $76 a barrel ahead of last Friday’s OPEC+ meeting. The tensions, which continued over the weekend, have cast doubt over how much oil could be delivered next month. Talks are scheduled to resume today.
Last week, most OPEC+ members backed a proposal to increase output by 400,000 barrels a day in August and delay the expiry of the supply deal to the end of 2022. The United Arab Emirates has expressed a desire to change the baseline that’s used to calculate its quota, which would allow it to increase production by an additional 700,000 barrels, and is against extending the pact.
If the UAE doesn´t agree with OPEC+, the market could be affected. A possible rift between the countries could result in prices falling to pandemic levels.
Brent is up more than 8% from last month, a move controlled by OPEC+. High energy prices worry the White House, which has already expressed concern about high gasoline prices. According to Morgan Stanley, weak supply growth elsewhere and the proposed OPEC+ increase is likely to keep the market in deficit, which is likely to support the forecast for Brent prices around $75-$80 in the second half of the year.
Meanwhile, West Texas Intermediate (WTI) this morning in the Asian session was down 0.1% at $75.07 at the time of writing.
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