Morning Update

This morning will see Eurozone retail released for March, where the general market consensus is forecasting a contractionary print of 3.5%. This would mark a further 1% fall from February’s data and is indicative of the squeeze on households manifesting itself on cuts in spending – particularly discretionary. This comes ahead of the respective talks of the Fed’s Goolsbee (a voting member of the FOMC) and Harker where markets will paying close attention to any insight on their monetary policy views. Both speeches of course comes ahead of US CPI released tomorrow, where the market consensus is estimating a headline print of 5.6% on an annualised basis – unchanged from last month – and a core print of 0.4% on a month-on-month basis. Following strong non-farms data, money markets currently imply that there is around a 70% chance that the Federal Reserve will hike on 3rd May, though such markets indicate that the central bank are approaching their terminal rate.

Today will also see the Swiss parliament hold sessions on the Credit Suisse-UBS deal and regulatory changes as markets weigh on a tumultuous few months in the global banking sector.

Last’s week’s price action remained heavily influenced on OPEC+’s announcement that they would look to reduce by some 1.16 million barrels per day from May until the end of 2023. Hence, despite non farms coming in higher-than-expected and thus raising the odds that the Federal Reserve may opt for a 25bpt rate hike, oil prices remain buoyed on the prospect of supply side pressures. As such WTI crude futures are now trading at over $80 per barrel up some 7.1% on the month and 2/3rds of a percent on the day.

More generally markets are also digested OPEC’s Secretary-General Haitham Al-Ghais warning over the potential for suppressed demand from Europe and the US. Though according to the International Energy Agency, global oil demand could rise by 2m bpd to reach a record level of just shy of 101.7m bpd. According to the IEA, half of the expected rise in demand will be driven by China’s reopening. Over the course of last year, Chinese oil demand dropped on average by 390,000 bpd, which also represented the first annual decline since 1990.

Away from the demand side, the IEA also highlighted potential oil supply side constraint. The group stated that: “World oil supply growth in 2023 is set to slow to 1 mb/d following last year’s OPEC+ led growth of 4.7 mb/d. An overall non-OPEC+ rise of 1.9 mb/d will be tempered by an OPEC+ drop of 870 kb/d due to expected declines in Russia. The US ranks as the world’s leading source of supply growth and, along with Canada, Brazil and Guyana, hits an annual production record for a second straight year.”