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Oil Prices Edge to Five Month Highs On OPEC+ Meeting

Thought for Thursday, highest level of trading in five months for oil prices, latest Eurostat data release on unemployment, and what's happening today.

Thought for Thursday

“In this pact, we hope to create a shield against aggression and the fear of aggression–a bulwark which will permit us to get on with the real business of government and society, the business of achieving a fuller and happier life for all our citizens” – US President Harry Truman, speaking on the day that NATO was formed, 75 years ago today.

Oil Prices Rise on OPEC+ Announcement

Oil prices edged higher during the course of yesterday’s session as they traded at their highest level in five months. Here, WTI crude futures appreciated above $86 dpb before slipping half a cent below this morning.

This rise comes as OPEC+ yesterday announced that they will maintain their current policy of supply side cuts as they urged members to keep to target levels. Last month, OPEC+ announced that they would ‘voluntarily’ cut output by 2.2 million barrels per day to the end of June.

However, it’s evident that adherence to the organisation’s quotas are continuing to cause division within the group. Indeed, acknowledging that some countries were pumping out more than their quota, the organisation said that “Participating countries with outstanding overproduced volumes for the months of January, February and March 2024 will submit their detailed compensation plans to the OPEC Secretariat by 30 April 2024”. It’s understood that some of the countries that have overproduced include Gabon, Iraq and Kazakhstan.

In addition, markets continue to weigh up the supply side implications of Russian oil refineries being targeted by drones as well as ongoing geopolitical fragility in the middle east.

With WTI now trading around 10% up on the month, attention turns to the release of PMI data today and the US labour print tomorrow.

Eurozone Unemployment

Unemployment rates in the Eurozone held steady at record lows according to the latest data release by Eurostat yesterday. The print showed that unemployment levels remained at 6.5%, in line with the previous three months but down from the 6.6% level recorded a year ago.

The levels also mark a considerable decrease from the coronavirus peak of 8.6% during August 2020 and is again indicative of the tight labour market conditions amongst much of the Eurozone. This comes as labour force participation levels remain at their highest levels on record, despite the implications of the pandemic and subsequent ‘great resignation’.

As we looked at yesterday, considerable disparities exist amongst the eurozone’s constituent parts with for example Spain seeing unemployment levels as high as 11.5% against Germany’s at 3.2%.

When looking at Spain, high levels of unemployment are often attributed to the types of contracts. For example, Spain has two main two types of employment contracts (regular open-ended contracts and fixed-term temporary contracts). Therefore, given that a great deal of sectors in Spain are seasonal (particularly in tourism, hospitality and agricultural), many previously on fixed-term temporary contracts have withdrawn from the labour market over the winter months. While the level of unemployment remains high relative to many of its European counterparts, it fell to its lowest level since 2007 during Q4 2023. This marked a far cry from the levels seen during the first quarter of 2013, when unemployment reached just under 27%. With economic conditions remaining sluggish across many of the Eurozone’s member states, many analysts also see a slowdown in the number of those being hired a temporary contracts.

Today’s Data

Swiss CPI came in softer-than-expected this morning in the first inflation print since the SNB unexpectedly cut rates by 25bps to 1.5% last month. Here, headline inflation eased 30bps from the 1.3% figure recorded last month.

Attention now turns to the latest string of PMI data with the Eurozone print published at 09:00 ahead of the UK’s at 09:30. At 12:30 the ECB will then release their monetary policy minutes while later this afternoon we will see US initial jobless claims. A number of policy makers from the Fed will also be speaking this afternoon as markets continue to consider the central bank’s next move.

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