Early reports from today’s much anticipated OPEC meeting indicate an increase in the output ceiling to 31.5 million bpd from the previous target of 30 million. It’s unclear if the increased production includes Indonesia, which recently rejoined the organization. It should be clear that this is a notional target to which OPEC almost never adheres.
The increase is in line with OPEC’s monthly report which estimated that its output was 31.4 million bpd in October. The organization has produced more than its previous target for the past 18 months, according to data compiled by Bloomberg, contributing greatly to an oversupplied market. Leading up to the meeting, the poorer OPEC members have been pushing the wealthier members, such as Saudi Arabia, to cut supply. However, the Saudis have previously stated that they would only consider a cut if OPEC members Iran and Iraq cooperated, along with non-OPEC member Russia.
Following the news, oil prices fell, with US crude trading down 96 cents at $40.12 per barrel after dipping below $40 earlier today. It appears OPEC intends to keep pumping at record high levels despite current prices. We should expect to see a further price drop if this happens.
The dollar rose against other major currencies as the jobs report released today by the Labor Department showed nonfarm payroll increased by 211,000 last month. This data also makes it very likely that the Fed will increase interest rates later this month, resulting in a strong dollar and decrease in commodity prices. The unemployment rate, however, remained unchanged from last month at 5 percent. This week’s report also modified October’s and September’s numbers upward by 18,000 and 8,000 respectively.