With the continuous price changes in the oil market, OPEC and non-OPEC oil producers are most likely going to agree to extend output cuts, with the possibility of as long as 12 months. OPEC, will be having a meeting in Vienna to discuss whether to prolong an agreement reached in December, in which OPEC and 11 non-members agreed to cut oil production by about 1.8 barrels per day in the first six months of 2017.
However, with the continuous and substantial price changes that is occurring on the market, rebalancing the supply and demand needs a little bit more time than expected; with this, the market seeks an extension of 9 months, instead of the initially approved six months. This is to fix the imbalance between supply and demand which makes crude prices unstable.
In fact, Saudi Arabia, being OPEC’s de facto leader, has claimed that the possible extension could mean a good move meant to speed up market rebalancing and prevent crude prices from falling back below $50 per barrel.
The U.S. dollar assumed a defensive stance after the Federal Reserve dialed down on some of the more aggressive policy expectations regarding a rate hike on Thursday.
The Federal Reserve policy makers agreed on holding off with raising interest rates, as they need to see evidence that the recent economic slowdown was no more than transitory, as their last policy meeting have shown on Wednesday. This indicated the cautious approach the Fed adopts towards interest rate hikes.
The weakness from which the dollar had been suffering lately due to political concerns centered on President Donald Trump made it hard for it to recover yesterday. The dollar index was down 0.3% at 96.972. On the other hand, the dollar was able to show some strength against the yen closing at 111.635 yen JPY. The Japanese currency was pushed away from a one week high of 112.130 recorded the previous day.
The U.S. currency was far more pressured by lower Treasury yields, which fell on the Federal Reserve’s signal of a gradual approach to raising rates.