Week Ahead: OPEC meets & FOMC releases minutes

In our first week ahead of the year, we’re checking out some particularly meaty topics. OPEC+ begins the first of this year’s new monthly ministerial meetings on Jan 4th as producers discuss gradually unwinding production cuts.  

The FOMC releases its latest meeting minutes – will they be a roadmap for US economic recovery? Plus, US nonfarm payrolls are released, which could show signs of strength in the United States’ job market. 

OPEC meeting 

The first of a new series of monthly meetings of OPEC and non-OPEC ministers kicks of this week, following on from December’s decision to delay the process of tapering production cuts agreed last year to prop up prices. 

This is the month where OPEC members plus allies will ease the stoppers slightly and increase production. OPEC+ has given the greenlight to pump an extra 500,000bpd from January until at least March. The total production cut for January will be 7.2m bpd compared to the 7.7m bpd cut in the latter part of 2020. 

However, demand expectations have failed to improve despite vaccines so pressure will remain on OPEC to monitor the situation closely. OPEC now expects global oil demand to have fallen to 9.77 million barrels per day in 2020 to reach 89.99m bpd, compared to over 90m bpd in its November estimations.  

2021 oil demand is now forecast at 95.89m bpd. That’s down 410,000 from the original OPEC projections published in the November MOMR. In October, OPEC had estimated 2021 oil demand to be 96.8m bpd. 

One key aspect of balancing price vs demand vs production will be member and ally compliance. There has already been a bit of dissention within the ranks, with likes of Saudi Arabia considering giving up its chairman position, for instance. Some producers within OPEC’s sphere of influence are steadfastly sticking to their own production targets, regardless of limits and stops. 

Libya has voiced its plans to increase its oil production and has previously stated that it will not accept any production quota until such a point where it can reliably produce 1.7 million bpd—compared to its current 1.108 million bpd. 

Iran, too, has promised to increase its oil production to 2.3 million bpd in 2021, up from 1.986 million bpd now. 

FOMC Meeting Minutes 

Minutes from the latest Fed meeting are on tap – giving a clearer indication of possible dissension over the extent to which the FOMC feels it needs to anchor long-term rates and whether further policy support is required. The question for the Fed is starting to pivot towards the reflation trade and rising long-term rates. 

Rising inflation expectations may be a problem for the Fed as it could force it into tightening sooner than previously expected. Whilst average inflation targeting gives it some leeway, we’ll be paying close to attention to whether individual policymakers are starting to fret over inflation and the need for more restraint in monetary policy.  

Nonfarm Payrolls 

The December jobs report caps off the week on Friday with surging Covid cases in the US likely to weigh on demand, albeit seasonal hiring will be a factor to considerIn November, a further 245,000 jobs were added to the US economy, whilst the unemployment rate edged down to 6.7%. This was well below the run rate of the last 6 months and indicated a slowing in hiring as case counts rose across the country. 

However, markets seem to be largely happy to overlook a softer pace of recovery in the jobs market though thanks to vaccines – December‘s report is backwards-looking and will reflect surging case numbers and new lockdown restrictions across multiple states. Moreover, soft jobs numbers only underline the need for sustained monetary and fiscal stimulus – we’re in a bad news is good news phase. 

Georgia Runoffs 

Voters will go to the polls for the Georgia Runoffs on January 5th in an election that will decide control of the Senate for the first two years of Joe Biden’s presidency. 

This will be exceptionally important, as a Blue Senate should mean easier passage of Biden’s agenda, which is pointed towards green energy and investment. However, the chances of a slim Republican majority seem pretty gooddespite November’s slim Democrat victory in the presidential elections, which would mean less regulatory and tax overhang. 

Outlook 2021 webinar 

Tuesday 5th January, 12.00 GMT 

Want to know what the key market topics will be in the new year? We’re asking the big questions with this webinar: Will inflation be the dog that finally barks? Will the UK stock market finally catch up? Will vaccines spur a reflationary return to normal environment? Join chief market analyst Neil Wilson to get the answers to the big questions in our 2021 Outlook. 

Sign up 

Major economic data 

Date  Time (GMT)  Currency  Event 
Mon Jan 4th  9.00am  EUR  Final Manufacturing PMI 
       
  9.30am  GBP  Final Manufacturing PMI 
       
  All Day  All  OPEC-JMMC Meeting 
       
  2.30pm  CAD  Manufacturing PMI 
       
  3.00pm  USD  ISM Manufacturing PMI 
       
Tue Jan 5th  9.30am  GBP  Construction PMI 
       
Wed Jan 6th  9.00am  EUR  Final Services PMI 
       
  9.30am  GBP  Final Services PMI 
       
  1.15pm  USD  ADP Nonfarm Employment Change 
       
  3.00pm  USD  ISM Services PMI 
       
  3.30pm  USD  US Crude Oil Inventories 
       
  7.00pm  USD  FOMC Meeting Minutes 
       
Thu Jan 7th  10.00am  EUR  CPI Flash Estimate 
       
  10.00am  EUR  Core CPI Flash Estimate 
       
  1.30pm  USD  Unemployment Changes 
       
  3.30pm  USD  US Natural Gas Inventories 
       
Fri Jan 8th  1.30am  CNH  CPI y/y 
       
  1.30am  CNH  PPI y/y 
       
  1.30pm  CAD  Employment Change 
       
  1.30pm  CAD  Unemployment Rate 
       
  1.30pm  USD  Average Hourly Earnings m/m 
       
  1.30pm  USD  Nonfarm Employment Change 
       
  1.30pm  USD  Unemployment Rate 
       
  3.00pm  CAD  Ivey PMI 

 

Key earnings data 

Date  Company  Event 
Mon Jan 4th  State Street Corp.  Q4 2021 Earnings 
     
Wed Jan 6th  RPM International  Q2 2021 Earnings 
     
Thu Jan 7th  Micron Technology  Q1 2021 Earnings 
     
  Constellation Brands  Q3 2021 Earnings 
     
  Walgreens Boots Alliance  Q1 2021 Earnings 
     
  ConAgra Foods  Q2 2021 Earnings 
     
  Lamb Weston Holdings  Q2 2021 Earnings 
     
Fri Jan 8th  Tata Consultancy Services  Q3 2021 Earnings