Breakfast Bites - Inflation and Oil

Rise and shine everyone.

The big news this morning is inflation and the OPEC Meeting.

We have the OPEC and OPEC+ meetings that have already started. It will be a series of 3 meetings which are expected to end around 10:30am - 11am ET, depending on how long the meetings carry on. Already, there’s news of an additional 1 million barrels per day cut, i.e., being termed a deeper cut. However, it’s unclear where the burden of these cuts fall and what the are being measured against.

If it’s against current 2024 quotas, then there’s not much of a cut compared to the current level of production. To understand this better, you can take a look at the current levels of production in the article I wrote at the beginning of the week, and we also concluded that the Saudi will likely not deepen their cuts but ask others to take a share. We won’t know for sure until all the meetings are over.

We also received inflation numbers for France and the Euro Area, both coming in cooler than expected fueling bets for rate cuts. Later on in the day, we receive PCE inflation numbers for the US at 8:30am ET.

Looking at the YoY estimates Core PCE is expected to be 3.5% compared to Fed’s projection of 3.7%, and Headline is estimated to be 3%, compared to the Fed’s projection of 3.3%. If the inflation data come in line with consensus, it would be lower than the Fed’s projection and we’re definitely going to see rate cut bets increase. It won’t be surprising if the market decides to the rally on this.

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