What To Expect From Today's OPEC+ Meeting

Okay, very good morning to you. Hope you are well. It is Thursday the 9th of April. So first of all, just a quick word: remember to like and subscribe to the channel, very much appreciate it. I've had some really quite fantastic comments on the videos, not about the video in terms of my delivery, but about market questions. And Jacqueline, I think you've had some really awesome questions as well last couple of days, but I absolutely welcome people to, to comment. I'll reply throughout the day. I'm going to be sat here all day anyway at home, so more than happy to help as and when I can. This is the amplifiedtrading.com website. If you've not come across us before and you're landing on this channel for the first time, remember to check it out. When you land on our home page, basically you've you're presented with a few different options. So dependent on really whether you're a trader or someone looking to get into trading, then just click on that Professional Trader Program here. 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But let's get on and let's look at the charts this morning. What have we got? Let's talk markets. So, uh, fairly quiet open, I would say. And obviously today is— I dub it OPEC day. That's going to be the main kind of focal point, that and initial jobless claims of course, which we're going to talk about. They're probably the two main things that are on my radar, as well as a surprisingly strong performance by US equities yesterday. And I say surprising, I must, you know, as much as I feel like I've done an okay job calling a few market moves of late, I certainly haven't quite yet got my timing on point for this equity move. Still hasn't yet really powered on, but yesterday we closed above that key level. And since you've, you know, as you've probably noticed noticed I've been still quite bearish. We were talking this time yesterday about this kind of bear market rally, and have we got to that point now where we're kind of peaking in that bounce back that we've had since the end of March, which has been this phenomenal push of some 500+ points? And do we start to fade back down now following the overall downward trend and the overall kind of economic picture? But yesterday we managed to close above that March-June 2019 low We've not got quite as high yet, up to the 50% fib and the August, um, 2019 lows as yet. But obviously that would be the upside target to keep an eye on in the futures. Those lows in that fib level pretty much coinciding around the 2790 type level. But I'm definitely interested to see how we perform here. Obviously it's a long weekend for most people because Good Friday. I remember when I used to work on my, my old desk before I joined Amplify, we only really had 2 days off a year And those would be Christmas, pretty much, well, it would be New Year's Day and Good Friday would be the main thing. Christmas Day, of course, would be a global market holiday, but those were the two days where I used to think, "Oh, thank you, we actually get a day off," because, you know, there's not, there was, because we were a 24-hour desk, there would always be one country that would be open. But Good Friday is pretty much global in that sense, so No trade tomorrow. There won't be any briefings then picking up until next Tuesday because here in Britain we'll have Good Friday and Easter Monday as well, so won't be back in operation on the briefings. But just follow me on Twitter, I'll be tweeting every day irrespective of that anyway, of anything interesting that I see. But what'll be interesting of course is going into typically an extended long weekend, you sometimes see Prices just tend to fade. A lot of people don't want to keep too many chips on the table just going into an extended weekend, just given the kind of the tail risk of something negative developing, particularly in the context of something quite unknown and quite volatile like a, like COVID-19. So yeah, be interested to see where we finish today. On that balance, you know, I still think there's potential for downside, but look, I think better to just trade what you see. It hasn't come true so far yet, so how it finishes today I think could be quite, quite telling going into, going into next week when we return from Easter. But let's just have a quick look at the coronavirus situation and then we'll talk about oil and jobless. So this is the overall total tracking. Now we're coming up to about 1.5 million confirmed cases, just shy of 90,000 on the death toll. One of the main things I was talking about yesterday, remember I did tweet this and this was something which featured in the briefing, and I was talking about the, the kind of symbolic nature of Wuhan in China, that kind of epicenter, if you like, of the initial outbreak, ending its 2-month lockdown. And I was talking about this, this idea about the inevitable kind of return in second and multiple waves of the coronavirus, and just generally how a pathogen operates, or let's say performs, over a period of time before then eventual vaccines are developed and general herd immunity becomes more common. But I did mention here on this last line, I still expect lockdowns in the UK and the EU to be extended because I've always had this view that generally governments have been acting in a twofold way. I think politicians have an objective where although they're trying to deal with a health issue, of course, they're also trying to manage public perception of the government's handling. And so as much as you might think as a person in public, well, why don't the government tell the truth? Well, the problem is if you tell the truth, it's a pretty horrific truth. And so people don't always want to hear that because then they'll think you're not doing a good enough job. So what do you do? Well, you try to sound proactive. You try to give these kind of near-term targets that you're trying to hit. But inevitably, what I mean with, with the expectation of it being extended is that ultimately this is a much more complex issue that isn't going to go away perhaps as quickly as people might have envisaged. And so, you know, this is what I'm looking at from, uh, the latest from JP Morgan estimates. And they try to— I mean, obviously this is manipulating data in such a fashion to give you just a graphical representation of this idea of where we are in the path of the virus so far. And I think it's pretty spot on. I mean, you've got China and Korea obviously much more into the recovery end of the, the curve. Germany pretty much peaking, as too are Italy and Spain at the moment. Seen some fluctuation actually throughout the week. Remember about 2, 3 days ago towards the beginning of the week, we were talking about Italy, Spain generally on the decline, but actually Some of those numbers have peaked up a little bit more recently. The UK, the US, much more still in the late accumulation, albeit out of the acceleration phase, which we're still seeing in some parts of the Far East. But inevitably, as I was kind of alluding to, the UK is likely to extend its virus lockdown by weeks. I was talking about, I think last week, the Deutsche Bank study where they were talking about the 12th of April they were going to look to reopen, which which is basically saying, well, you know, Easter Sunday things are gonna go back to out of lockdown or loosening the lockdown terms. But I always thought that was wildly optimistic in terms of timing. You know, the death toll at the moment is pretty much at its worst point. And according to scientists, they predict the UK will be headed into the peak of the outbreak over the next week. And I think it will be quite interesting actually over Easter. I mean, I mean, I live in central London, so when I look out my window, obviously I live in a fairly densely populated area, and when I look out, I do see people just arriving in their car, getting out with their friends, going into people's houses, coming out, meeting family. Pretty sure that's not what constitutes self-isolation, but I'm not criticizing them, it's just an observation. But my point being is Easter, you know, is there a risk that there's going to be more people doing that? Not adhering to what the government's asking for at this point in time and what's going to be a better way to deal with the virus. And so this is why I think countries like the UK, perhaps a little bit different from countries like China in terms of their cultural response to these types of quarantine measures, but also let's not beat around the bush, the way that China authorities tend to implement these types of rules is probably wildly different as well compared to what we have here in the UK, for example. But yeah, this is the latest. It's been confirmed pretty much in The Guardian. Dominic Raab, the kind of stand-in Prime Minister, is going to confirm this over the weekend. Obviously things are getting worse and they're going to have to extend beyond that point. I guess probably the likely milestone will then be towards the review at the end of the month, I would say is probably most likely. But I've already seen countries like France saying, well, not the end of the month, perhaps even longer than that. And I'd expect this to remain the case in terms of these moving goalposts. Um, the main thing that I want to talk about here is— then let's move off that subject and let's talk a little bit about the oil market, uh, because there was— I just happened to sit down, I was doing a, um, a kind of private webinar for some of the guys on the Amplify How Now, uh, Amplify Now portal So if you just go on the AppFi Trading on the Traders section, you can, you can get some more information on that. But we were talking and all of a sudden, bang, oil prices just started popping, what felt like a super aggressive move at the time because it really came out of nowhere. And this was this move here. It was quite interesting actually, sitting here at what, 7, 7 PM last night, the news, well This is the problem, and this is something I want to make you aware of. The news didn't break and then the market moved. The market moved and there was no news. Now, this is a very interesting point I want to make here. Um, you know, sometimes that does happen, particularly late in the evening. Generally, it can be a little bit of a byproduct of the time of day. There's obviously very little UK, European participation in the markets, only the Americans and it's an anomaly in terms of it's not scheduled news announcements. Something's probably come out. And, you know, if you're ever looking at price or candlestick formations, um, whenever I see a candlestick formation like this over a pretty short period of time, you know, it's pretty clear that that's a fundamental catalyst that's pushed that price. This isn't order structure or market profile. This isn't a technical break of a level. The, the way of which these candles are formed would suggest that in order to see a price movement from 24 to 26.50, that undoubtedly needs some kind of fundamental catalyst to just shoot the price higher in such an aggressive short-term fashion. Now, if it was a more graduated move, kind of like this price movement here, and it happened over the course of, say, half an hour, that can be a different that's a different matter. Yeah, if it happens in a 1-minute candlestick, 1 or 2 minutes, typically then there's a fundamental reason. The interesting thing last night though, there was no news. Uh, it took a couple minutes later until people started bounding around, uh, comments basically, uh, out of, uh, the Algerian energy minister who holds the OPEC rotating presidency at the moment. And he told this country's state news agency that they're discussing a massive output reduction which may reach 10 million barrels per day. And that was what's being— or what was being pinned on the move. Now, a secondary point I want to make here, if you ever are, you know, you just happen to be there sitting and you want to capture some of these moves, the way markets tend to operate is, um, it was quite a messy, uh, release because there was no definitive one headline. People started circulating this Algerian comment on Twitter, which That's why you've got the formation of 1, 2, 3, 4-minute candlestick move before here. Then we hit the eventual peak. And when people are jumping on what we call these fast money moves, just trying to profit off very short-term volatility, where do they look to, to exit a trade if they're in it long? Well, they want to get out at the nearest, clearest possible exit point. And often that's when the daily pivot points are really good for that. If you're in a fast-moving market off a news catalyst And you can see that happening here. So people bailing just before it came up to that 20— what would have been around the 2650 in yesterday's pivots. And then the market came all the way back down. Fundamentally though, even though the market did come back down, that's byproduct, I think, of those fast money players just chasing the market up and bailing. And then the actual trend occurring here overnight is the more telling kind of move. Because net-net, if you actually look to where we were then into the overnight session, we got back up to this area here, which was the initial spike high. So underlying obviously these moves and that spike, even though there was some short-term profit-taking on the initial headlines circulation, is the idea that it's quite possible, it seems, that they're going to strike a deal to cut aggressively by 10 million, as what some market participants had feared might not come to fruition. Um, so yeah, hopefully that explains a little bit more about how I observe and the execution around that type of fast-moving market. I'm going to bring up the crude chart and we're going to talk about scenarios. But before I do, let me give you some background of what's going on. So timing-wise today, what is the deal? Well, OPEC having this teleconference call, of course, That's going to begin at 3 PM London time. Remember, it's the OPEC side of things we're looking out for today. So predominantly we want commentary out of the likes of Russia and Saudi Arabia, as well as the kind of non-Saudi Gulf nations. And then you've got the G20 energy ministers. They're going to be meeting actually on Good Friday. That really goes to say a lot, I think, about the, the necessity to get some sort of deal done. They're meeting on a religious kind of holiday in that sense, but that's where we're going to start throwing in countries like the US, Canada, Brazil, the UK, and so on. So the next 2 days is really important. Let's talk over what the latest news is. So Russia has said Wednesday, yesterday, that it's willing to reduce output by 1.6 million barrels per day, or roughly 15%. Now that was one of the other supplementary bits that came out with the Algerian comment at around the same time, 7 PM London last night, that fueled the price higher. Um, the Kremlin insists the US should do more than just let market forces reduce its record production. So still a little bit of pressure or pushback coming on behalf of the Russians in regards to they want the US to do something more meaningful in order for them to agree with Saudi Arabia that they're going to take some sort of coordinated action. Now, the US demand— now, this is some interesting stats I think help with context— the US demand on crude has now fallen to 14.4 million barrels a day. That's the lowest level in data going back to 1990, and down from more than 30% from the pre-crisis level. So again, we are a country that's essentially gone into national freeze, if you like, or lockdown, meaning that activity is reduced substantially and travel is down immensely. And so therefore demand, when you're looking at the supply and demand balance, has severely decreased. Now the world uses about 100 million barrels a day, but some traders believe it's consuming just around 65 million at the moment. So that's quite a catastrophic decline in demand. If you think about these numbers that we're talking about, the world on average consumes about 100 million barrels a day of crude oil. We're hypothesizing then, going off the data that these banks are punching, these numbers, is that that 100 has dropped to 65. But we're talking about an OPEC, um, an entire coordinated oil-producing agreement to cut production by 10 million barrels a day. The maths doesn't quite work out in that respect. I mean, the demand shortfall, I mean, it's much larger than the most optimistic cuts. Even if OPEC+ went to 15 million, it still doesn't quite match up to then even out the market. So beyond— I mean, if they deliver 10, if they deliver 15, if they deliver the latter, the price is going up. I mean, because people are generally very pessimistic about OPEC's ability to, to get a deal over the, over the line. So delivering on the most high bullish end would be a massive surprise, and prices would fly higher in that scenario. But what I'm saying is, over the medium term, even if they did cut a deal, I just wonder about the longevity on its ability to be able to support price given the catastrophic nature of the drop in demand. But over this record level historic cut to crude production, but nowhere near, I don't think, to offset that, that demand side. Um, the other, the other thing I'm a little bit also somewhat skeptical about is, let's say they do cut a deal, well, how long is this deal enforced for? Now, there has been a little bit of variance in press speculation about this. Some have said 3 months, some have said to year-end, but obviously there's big differences here. Now, I guess you have to kind of think about, well, what's your view on the U-shape, V-shape, Nike swoosh shape type recovery we're going to see in the global economy post-COVID-19? When does COVID end and how quickly does the economy recover? Will probably go in sync then with the general demand curve as well. So here you've got to make some big judgment calls. I think if OPEC, for me, let's say they agree 10 million, you might get a little bit of a relief rally that they've confirmed something in oil. But then if they've done 3 months I'd say 3 months not enough. Economy's not going to bounce back in 3 months after the coronavirus globally. And so do you get a kind of confirmation or rally and then we start to sink lower again? But if they go to year-end, I think that's probably more healthy in order to offset what is going to be extreme economic pain. Some growth levels, in the case of the UK I was looking at yesterday, it's going to be the worst growth that we've had in Britain coming up in the next quarter or so since the Great Depression. So, you know, demand really does, uh, is going to be impacted. So supply really drastically needs to be cut for a longer extended period of time, if that makes sense. So it's not just about the number. For me, it's about the duration. It's a twofold thing. Now, what I did see, if we just quickly go over to this comment here. Now, this was citing ING, the Dutch bank. They said global oil cuts seen falling short and crashing prices. Now let me just go over this. Their head of commodity strategy says he reckons they're going to cobble together, uh, a global agreement to curb 67 million barrels per day. So remember, that's 3 million to 4 million short of what has been set as the benchmark of expectations. Now he doesn't think that the US will be given a direct mandate to cut specific volume because of its antitrust laws. Remember, We covered this on Monday. Antitrust laws in the US state that US corporations cannot take part in any discussions about cutting crude oil, but the country, America, will still contribute output declines as drillers halt activity because of low prices. Remember the function here. If prices remain particularly low, well, it's no longer operationally feasible for these oil drillers, particularly these more smaller, medium-sized independent oil firms in America, to be operational. it's just a loss-leading business. So naturally then, the volume of oil production in America starts to decrease off these record-high kind of 12.5-13 million type levels back to probably about 2 million off that. So what Trump will be trying to do here is that the natural forces then of a lower price reducing American supply back by about 2 million could be then enough that he doesn't really need to pay to take part in the deal. The question mark, of course, is does Russia and Saudi agree that that in fact is enough? Because you're taking it for granted then that Trump is going to follow through, as are the domestic oil firms in America, what should be the natural course of play. But, you know, we're dealing with Trump here. Perhaps they want something a little bit more committed and ironclad for them to agree to do the factual cuts themselves. So there's so many risks, permutations, you know, the politics obviously are so mixed and murky between these countries, it means striking a deal is particularly difficult. Um, ING said they see Saudi cutting about 3 million, Russia 1.6 million, as we've heard and speculated last night. Other OPEC members and countries like Canada will contribute enough cuts to get it up to then that 6-7 million marker. Now just going back to the chart here, this is what crude looks like of course, over the core— or over the period of the last month or so. If we get a cut of 6-7 million, I'm gonna— I'm gonna get some rectangles here and place— place some, uh, I'm gonna be bold and I'm gonna put a couple of price targets out there. I'd say if we get a cut of 6-7 million, um, agreed by the end of Friday, let's say, once we've seen the G20 ministers speak as well, um, I think because markets will be closed Depending obviously what else gets said and developments of the coronavirus would be an added variable. But let's say hypothetically speaking, cases in America, in the UK getting much worse. So how worse will be a key consideration. But $6 to $7 million, I'd say I'd be very bearish on, on where oil will reopen when it comes to, well, in the electronic trade in the US on Sunday night, but then when UK come back in on Tuesday. I'd be no surprise to see us back down in this lower quartile of price, which would be— let's not forget, if we go back to $20, that's a, that's a good 20% away from where we are at the moment, a 20% depreciation in price, which is pretty huge. So even if they cut, I think OPEC members will be very mindful of the fact that if they go to something like $6, $7, what's the point? You know, it's a really difficult spot. It's kind of like central bankers in a sense of You know, as much as they don't want to listen to markets, they kind of do because the market price almost forces their hand. So I don't think that they will want— it's either— I mean, worst case scenario, then they go, well, it's either $10 million or nothing. If they do nothing, well, then I'm afraid that not only do we get down to that price point, but we see this type of price movement. We head to that long-term level that we've talked about before which is that 9/11 post-low, which was down at $16.70. I don't think that's off the cards, um, quite frankly, if they do not strike a deal. Now, depending on how today plays out, I mean, today's kind of part one, albeit probably the more important one because it's Russia and Saudi, and they would have already had these conversations with America. So key levels I'd be looking at is kind of here. I know it's a bit more— I put an X, which is the highs that we had from yesterday before Europe came in. And you can see you've had some other previous areas where the market has responded to that same price point around 25, 24. I'd then keep an eye on the actual low of the range from Tuesday and Wednesday, which was down here at 23.68, and then the corresponding levels, then the next one of significance coming down at 21.70. On the upside, let's say if they do start looking like they're going to deliver this 10 million, I do think even though that's kind of in line with expectations, I think you'll get a little bit of a relief rally. And definitely I think we could squeeze up to $27.19 under those circumstances, which would be back to what, Tuesday's highs before the breakdown that we had in price. Um, definitely if you're looking on the, the balance here from a market reaction point of view, the risk is to a much larger move to the downside than it is to the upside. The likelihood is much more tilted probability-wise of not delivering than over-delivering, if that makes sense. So hence the reason why my talk of targets is quite biased to downside levels in that respect. If they did deliver 15, let's say, well, I think we punch even higher and we can get up, up until these levels, which become a little bit more important to that kind of mid-March high, that previous 3rd of April high, and we start going up, back up towards $30 again. But again, you can see how, how messy this gets. And one thing I can say from experience is look out for lots of rumors to be hitting the tape as we go through the next 48 hours. You're gonna have to be all over Twitter, and certainly if you've got a squawk like we use, News Squawk, then hopefully they're gonna have your back and keep you covered on all of the events. All right, let me run you through then the last few pieces of news. Um, we'll look at the calendar in a second, but just so you're aware, Jerome Powell— just about see his head at the bottom there— this fella, um, he's going to be hosted by the Brookings Institute in Washington. Powell's delivering prepared remarks at 10 AM local time, so that's going to be 3 o'clock in London, so exactly when the OPEC meeting commences. He'll then participate in a virtual question Q&A to discuss the Fed's moves last month and slash interest rates and enact a wide array of emergency measures. Now, you know, the minutes came out last night, and when I was— I was— I didn't watch them as they came out. I came back on the computer a bit later and I was having a look, and kind of sign of the times of how irrelevant they were. It's quite hard to find any information about it without looking at the actual statement and minutes in itself. So probably this is why the Fed have have kind of created this staging post. They want to give a little bit more of a detailed insight. The Fed are very good at this, like all central banks. They want to be quite transparent with the market, communicate, let them know what they're thinking, uh, just to alleviate any tensions there might be, and so that the market feels confident with the current policies that are in play. So he is speaking later, something to be aware of. But when we look at the calendar of what's to come for, for today, so just to tie off. We have already had some UK data, of course, that's moved now to the new time of 7 AM, not 9:30 traditionally. How has that performed? Well, these are February numbers, so I'm not going to spend any time looking at them, to be quite honest. The industrial production, manufacturing production, they were all negative, but they were pre the COVID situation, so not really that important, and hence not much movement coming on the back of them. But if you go back to the calendar, you've got the ECB minutes coming out, perhaps could be quite interesting if you're trading the euro, DAX, Bund. That'll be at 12:30 London time. But then you've got initial jobless claims, of course. And obviously this has been a bit of a, a focal point in terms of really the, the reality hitting home about how devastating this is going to be to the jobs market in America, because weekly jobless claims are seen hovering near these record highs. Remember last week we had a 6.65 million reading. Today's figure is expected at 5.25 million. If we go back to the actual, uh, range, we've got a range on a low of 2.5, but check this out, there is a high on the range on the street of 9.295 million. So we could potentially see a figure in one week close to 10 million if we take the most pessimistic estimate out there. Now of course this is what it looks like on the virus effect on US unemployment. We've basically had job— initial jobless claims go 3.3, 6.6. If we get another kind of 5+ reading, that will take us to 15 million in only 3 weeks. And some people have even said that states are appearing to struggle to process just the incredibly high volume of, of claims that are coming in. So it could even be even higher than what we're seeing at the moment. Which is why there might be a little bit of a pent-up nature of what the risk is of seeing like an 8-9 million number that have been people who hadn't been able to get into the system over the previous 2 weeks, if that makes sense. So yeah, I'd say this is becoming potentially less market-moving than it was before because this is now the new norm, as it, as it, as it has been given that we've seen it twice. I guess it's if we get to the point where the number starts coming in at 9 million, you know, that does present a bit of a different ballgame about how severe that second quarter downturn is going to be in America and subsequently globally. And that could be a trigger point as well, could weigh on equities for sure, could weigh on oil as a side product to that. And the one thing I would say with oil prices, just to conclude the conversation from earlier, is that equities and oil. If OPEC do not strike a deal and we do see a meaningful decline in oil prices, well, that could act as— then that could be the catalyst for that bearish kind of third phase bear market rally to initiate. And then we start pulling down in equities. If the jobless number comes in at 9 million, the coronavirus cases then start to pick up again in like the plateaued areas of Italy and Spain, but accelerate still in the UK and the US over Easter, that will set us up for quite a bearish kind of into the, into the session the week today, but also the reopening that we'll get on the, the commencement of trade next week. So that's it, not going to go any further than that. Hopefully that gives you what you need. Again, OPEC and the jobless claims, probably the key things. Then over the weekend, just follow me on Twitter there's my handle. I'll be, you know, keeping you abreast of all the main information you need to know. I'll release my macro menu that I normally do on a Sunday as per normal, so look out for that. Otherwise, I wish you a good and safe weekend wherever you are. Take care, and I'll speak to you next week. All right, thanks very much, guys.