After a brief rally supported by speculation of tight supplies, crude oil crashed. WTI experienced its largest single-day fall since 2017, as supply increases hit the wires. Negotiations between OPEC and non-OPEC producers have moved faster than expected, but the biggest surprise was Saudi Arabia’s commitment to "work with major producers and consumers within and outside OPEC to mitigate the eﬀects of any supply shortages." We suspect producers will marginally increase output limits. Meanwhile, US inventories increased for their 14th week. In summary: higher oil prices cannot be relied on to support growth and therefore commodity currency valuations.
By Peter Rosenstreich