Mixed signals should temper the appreciation potential of crude oil as upcoming US labor data should provide a boost to the greenback. Meanwhile, uncertainty as to whether the US is expected to defer the 15 December 2019 tariffs on $156 billion Chinese products following China’s act of goodwill after waiving import quota tariffs on US soybeans and pork leaves market participants puzzled. The OPEC+ meeting in Vienna is expected to result in a further production cut of 500’000 barrels per day in addition to current supply curb targets, while an extension beyond March 2020 should still be determined at a further encounter. Therefore, crude oil appreciation potential should temper following this week’s advance as the initial public offering of Saudi Arabia’s Saudi Aramco is expected to make headlines next week.
OPEC meeting is expected to conclude with further reduction from current 1.2 million bpd after EIA crude oil inventories declined by 4.9 million barrels (prior: +1.6 million) for the week ended 29 November 2019, the first decline in five weeks and largest in three months. With the escalation of tensions in Iran in a context of increasing political threats and the Pentagon considering potentially committing thousands more soldiers to the region, it seems that geopolitical events are likely to support black gold in the coming year. In the same vein, the IPO of Saudi Aramco (1.50% stake), which remains exclusively open to both domestic institutional and retail investors, and which should take place along 11 December 2019, is estimated to raise a total of $25.6 billion ($32 Saudi riyals or $8.53 per share), beating Alibaba Group record of $25 billion. The latter would yet maintain the world’s largest oil producer’s market valuation at $1.7 trillion, below the $2 trillion expectation of the kingdom.
By Vincent Mivelaz