What to Look out for Today – UAE Cutting Output, Will Oil Go Up?

We have seen a steady increase in oil price the last few days – within a month (from Jun 26th to Jul 26th) Brent went from 45.83 to 50.62 – largely due to the OPEC+ agreement to restrict production and diminish global reserves (although not entirely successful – some OPEC countries produced more oil in June than they did a year ago without restrictions). On Monday OPEC members met in St. Petersburg to review the outcome of the now historic agreement. Compounding this trend was the IEA’s report released this month showing a slow in U.S. production which initially intended to offset the OPEC+ curbing of production by ramping up stateside operations.

We might expect this trend to continue into the future – because according to a statement shared on Twitter on Tuesday – Minister of Energy Suhail Al Mazrouei noted that starting in September the UAE will lower production of three different types of oil by 10%. At the moment, the UAE has only met 54% of its commitment to OPEC.
In non-oil related news, Australia’s CPI released today rose a modest 0.2%, resulting in a paltry 1.9% inflation under the RBA’s target of 2-3%, this caused AUD to drop to 0.7895 against the USD or 0.53%.

Another significant event today is the UK’s Inflation Report Hearings and the GDP will be released. Although some analyst expect growth in gross domestic product, this probably won’t bring equilibrium to the currency as other news – such as banking giant Deutsche Bank is considering moving a Goliathan 350 billion dollars from the UK to Germany (specifically Frankfurt).

Finally another currency that has experienced its fair share of volatility – due to political scandal, loss of confidence for the Trump administration to deliver on its pro-economic policy after yet another failed attempt to restructure he so-called Obamacare system – the USD has two very important economic events scheduled.

Today both the Federal Reserve’s Interest Rate Decision and Monetary Policy Statement will take place.

Unfortunately for the USD, investors are not expecting a pro-dollar rate hike – as Janet Yellen Chair of the Board of the Fed stated in the beginning of June that although an interest hike is expected the policy should be gradual to avoid out pacing earning and inflation.

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.

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