OIL: Crude Softer After OPEC+ Weekend Decision
Crude prices have fallen ~3% today as the market reacts to OPEC+’s decision on the weekend to increase output by another 411k b/d in June. Meanwhile, tensions appear to be rising in the Middle East, and the market continues to watch for signs of US-China trade talks amidst global demand concerns.
- OPEC+ agreed to increase output by 411k b/d in June, equal to the volumes decided for May. The increase will take the total combined April, May and June hikes to 960k b/d, 44% of the 2.2m b/d of cuts agreed since 2022, Reuters says. The group could fully unwind its voluntary cuts by the end of October if compliance does not improve, OPEC+ sources told Reuters.
- Goldman Sachs has cut its oil forecast by $2-3/bbl in reaction to the further rise in OPEC production and Morgan Stanley has reduced its H2 2025 Brent projection by $5 to $62.50, according to Bloomberg.
- Barclays reduced its Brent forecast by $4 to $66/bbl for 2025, and by $2 to $60/bbl for 2026.
- ING expects Brent to average $65/bbl this year, down from $70/bbl previously.
- US President Trump said Sunday (ET) that there could be a number of trade deals completed this week. The main worry has been over the possibility of an agreement with China, the world’s largest oil importer, but Trump said that Chinese and US officials were talking about “different things”. He plans to travel to the Middle East this month.
- Israel’s security cabinet is set to meet to approve an expansion of military action in Gaza, Bloomberg reports, ahead of President Trump’s visit to the Middle East this month. Meanwhile, Israeli PM Netanyahu vowed to retaliate against Iran after a Houthi missile landed near Israel’s main airport.
- Brent JUL 25 down 2.7% at 59.63$/bbl
- WTI JUN 25 down 2.9% at 56.59$/bbl
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AUSSIE 10-YEAR TECHS: (M5) Strong S/T Bounce
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.915 - High Apr 4
- PRICE: 95.860 @ 16:42 GMT Apr 04
- SUP 1: 95.420/95.300 - Low Feb 13 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.640 - 1.0% 10-dma envelope
Aussie 10-yr futures extended a recent strong bounce through to the Friday close, putting prices through the top end of the recent range. The confirmed breach of 95.851, the Dec 11 high on the continuation contract, reinstates a bull cycle and focuses attention on resistance at 96.207, a Fibonacci retracement point. A stronger bearish theme would expose 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
USDCAD TECHS: Bearish Structure
- RES 4: 1.4452/4543 High Mar 13 / 4 and a bull trigger
- RES 3: 1.4415 High Apr 1
- RES 2: 1.4308 50-day EMA
- RES 1: 1.4242 High Apr 4
- PRICE: 1.4196 @ 17:10 BST Apr 4
- SUP 1: 1.4028 Low Apr 3
- SUP 2: 1.3986 Low Dec 2 ‘24
- SUP 3: 1.3944 61.8% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 4: 1.3894 Low Nov 11 ‘24
USDCAD rallied Friday, but remains lower on the week after Thursday’s downleg. The move down has confirmed a clear reversal of the bull cycle between Sep 25 ‘24 and Feb 3. Price is through a key support at 1.4151, the Feb 14 low. This signals scope for an extension towards 1.3944, a Fibonacci retracement. On the upside, key short-term resistance is seen at 1.4308, the 50-day EMA.
CANADA DATA: Unexpected Jobs Contraction Boosts Implied April BOC Cut Chances
Canadian employment unexpectedly contracted in March, falling by the most since January 2022 at -32.6k (+10.0k expected, +1.1k prior) in a sign that the trade war with the US is spilling over increasingly into the "hard" data. The unemployment rate ticked up 0.1pp to 6.7%, in line with expectations and below the November 6.9% high, though unrounded it rose from 6.55% to 6.71% - the largest increase since November.
- The drop in employment was largely due to a 62.0k drop in full-time positions (after -19.7k, the 2nd straight drop), with part-time up for the 4th consecutive month at 29.5k (after 20.8k prior) - that mix is clearly indicative of hiring uncertainty among firms.
- The monthly full-time drop was the 2nd largest since the pandemic lows in the labour market (April 2020). Goods producing jobs fell by 12k (2nd consecutive decline), while services shed 21k (wholesale/retail trade and Information, culture and recreation led losses).
- The participation rate dipped 0.1pp to 65.2%.
- Wages were soft, dropping 0.2% M/M for the first drop since November, with the Y/Y rate slipping to 3.6% from 3.8% prior. The rise in permanent employees' wages of 3.5% Y/Y was well below the 4.1% expected (4.0% prior).
- Market-implied probability of an April BOC rate cut rose to as high as 68% after the data before settling the day at around 55%. That compares to 40% prior to Wednesday's US tariffs announcement.
