· OPEC+ backs extending cuts in crude oil production.
· It`s too early to end FED emergency programs: Powell.
The Joint Technical Committee of the Organization of the Organization of Petroleum Exporting Countries and its Allies (OPEC+) held a meeting yesterday and pointed towards extending crude oil production cuts. Currently, the organization maintains cuts to production at 7.7 million daily barrels and in January, they will reduce this to 5.7 million daily barrels, according to the agreed upon actions in May. However, the majority of the organization`s members have expressed their support to extend cuts at current levels for at least three more months amidst weak demand for energy with the virus`s recent developments at a worldwide level. Some member countries are against this measure, such as Iraq and Libya, who are more concerned about normalizing production as soon as possible and will only sign the extensions if there is unanimity. Other countries are worried about the possibility of demand weakening even further and have proposed drastic measures that include increasing the cuts. Any action on behalf of the OPEC+ that would prevent a reduction in cuts will be good for energy prices, which have seen a rally at close to 5% this week, mainly boosted by the positive news regarding the development of vaccines and the OPEC+s intentions to maintain energy prices stable. OPEC+ ministers will hold a meeting on November 30th and December 1st to define actions to be carried out in 2021.
In a public Bay Area Council event, Chair of the FED Jerome Powell reiterated his concern about the risk that the acceleration of COVID-19 cases raises in the US. Powell assured that the main risk to recovery in the short run is the virus, which is why the FED discarded ending its emergency liquidity programs in the near future despite demand being weak in recent months. Powell is concerned that the fast spread of the virus will reduce confidence among individuals that, out of fear, will not carry out activities that will put them at risk. “There are some signs of that already”, said the Chair of the FED. Recent news about the vaccines developed are huge for the medium term, affirmed Powell, but in the short run, there are still risks and the economy is still far from completely recovering from the pandemic`s effects. An upsurge of the virus is threatening to once again impact the labor market and several aid programs will come to an end at the end of 2020. Unemployment programs – which aid up to 12 million people in the US – will come to an end at the start of 2021, along with the freezing of student debt payments, mortgage payment extensions and an important part of the FEDs loan programs. Congress must decide soon whether it wants to extend these programs.