OPEC+ meeting and the return of Iranian crude in the oil market spotlight

This week’s focus will be on economic data, especially the U.S. May non-farm payrolls report will be watched with great interest and will affect whether the Fed will discuss tapering its bond purchases at the next interest rate meeting. This Monday is Memorial Day in the U.S., which does not rule out market volatility due to the lack of liquidity over the long weekend in the U.S.

①OPEC+ meeting and Iran issue will be the focus of oil market this week

Crude oil traders will be watching Tuesday’s OPEC+ meeting and any comments on the prospect of Iranian supply resumption this week. According to surveys, OPEC+ is expected to stick to its decision to raise production in July at Tuesday’s meeting.

Oil-producing countries now generally agree that there is a huge supply gap in the current oil market. Analysts generally expect OPEC+ to confirm its plan to increase oil supply by 840,000 barrels per day in July, completing a three-step process to restore more than 2 million barrels of production this summer.

For crude traders, the focus will be on how fast OPEC+ will increase production. Watch for hints from OPEC+ at this week’s meeting on its strategy for the next quarter. Once the current production increase is completed in July, OPEC+ will still have plenty of spare capacity, which theoretically equates to nearly 6 million barrels per day, or about 6% of global supply. Traders have their sights set on statements from Saudi Arabia and Russia.

A decision on policy changes beyond July is not currently expected at this meeting, but any hints given by ministers will be closely watched.

Also clouding the oil price outlook is the possibility that Iran will resume more supply after the Iran nuclear deal is restarted, even though a rebound in demand is pushing up oil prices.

Russia’s envoy to the International Atomic Energy Agency (IAEA) said that Iran and world powers will restart a fifth round of nuclear talks and that the current Iranian talks should be the last.

According to the Islamic Republic of Iran News Agency (IRNA), Iran started delivering oil through the Goreh-Jask pipeline. On May 29, local time, RIA Novosti also reported that the United States is again buying oil from Iran after 30 years and is importing an average of 33,000 barrels per day. The Iranian side responded that there was no official information from Iran in this regard.

② U.S. May non-farm payrolls data fear to cause gold prices to plunge?

Dow Jones said economists expect this Friday’s jobs report to show about 674,000 new jobs in May, after adding 266,000 jobs in April, only a quarter of what economists expected.

Given that April’s data fell far short of expectations, May’s results will be even more critical. If employment expectations fail to materialize for two consecutive months, the market will become nervous, especially considering that U.S. stocks will enter the usually weak month of June.

Bank of America released a report on the 28th that May nonfarm payrolls will be a key data point for the Fed to decide on the path of monetary policy, especially given the backdrop of soaring inflation and inflation expectations, while the annual Jackson Hole Global Central Bank meeting in late August could be a window of time for Fed Chairman Powell to announce his final decision.

In addition, President Joe Biden will speak on the May nonfarm payrolls report on Friday, June 4, local time. Biden also came out to speak after the last far less-than-expected non-farm payrolls release in April, using it to promote the need for his economic stimulus plan.

Edward Moya, senior market analyst at OANDA, said $1,950 is the next key level for gold to watch, but this week’s nonfarm payrolls are a huge risk for gold. If the data is unexpectedly sharp and last month’s data is revised sharply upward, the 10-year U.S. Treasury yield could rise to 1.70 percent and gold prices could fall $30-40 on the conditionality.

Other heavyweight data this week include.

Tuesday (June 1), final May manufacturing PMI for France, Germany and the Eurozone, preliminary May annualized CPI for the Eurozone, final May Markit manufacturing PMI for the U.S., May ISM manufacturing PMI for the U.S., U.S. construction spending for April and the Dallas Fed Business Activity Index for May.

Thursday (June 3), France, Germany, Eurozone, UK May services PMI final, US May ADP employment, US weekly first-time jobless claims, US May Markit services PMI final, US May ISM non-manufacturing PMI.

On Friday (June 4), Eurozone April retail sales, U.S. May non-farm payrolls report, U.S. April factory orders.

In addition, on Thursday, the Federal Reserve will release the Brown Book on economic conditions. The above data and the Fed’s Brown Book will demonstrate the extent of supply shortages in not only manufacturing, but also in the largest sector of the U.S. economy, the service sector.

③ Fed Chairman Jerome Powell speaks with a group of officials

This week will be the last chance for officials to clarify their policy views before the Fed’s rate meeting silent period begins on June 5. On Friday (June 4) at 19:00, Fed Chairman Powell will attend the Bank for International Settlements’ online meeting on climate. Other Fed officials who will speak this week include.

Tuesday (June 1), an interview with Fed Governor Quarles.

Wednesday (June 2), a speech by Fed Governor Brainard at the Economic Club of New York.

Thursday (June 3), Chicago Fed President Evans, a member of the 2021 FOMC ticket, speaks on the current state of the economy and monetary policy; Philadelphia Fed President Harker speaks on the economic outlook; Minneapolis Fed President Kashkari, Atlanta Fed President Bostic, Dallas Fed President Kaplan, and Philadelphia Fed President Harker participate in an online conference on the topic of race and the economy. Dallas Fed President Kaplan moderates a conversation on U.S. and global economic issues.

On Friday (June 4), Atlanta Fed President Bostic, a member of the 2021 FOMC ticket, speaks; Fed Governor Quarles speaks.

As market concerns about inflation continue to grow, Fed officials are beginning to blow the whistle on “QE tapering,” which means they may accelerate discussions on QE tapering arrangements. Watch their speeches this week to see if they will release signals to adjust monetary measures such as QE tapering.

④U.S. infrastructure talks meet an important point in time

U.S. White House officials have publicly stated that Memorial Day (May 31) will be the deadline to determine whether a bipartisan agreement on a massive infrastructure plan is possible.

But for now, it still looks difficult. Last Thursday, U.S. Senate Republicans formally proposed a $928 billion infrastructure package to the White House, which, although significantly higher than the previous $568 billion, is still significantly lower than the latest $1.7 trillion package proposed by the White House.

In addition to the amount gap is still very large, the two sides in the definition of “infrastructure” and how to pay for the gulf, is expected to continue to negotiate between the two parties. If the two sides fail to negotiate, the Democrats may again force the infrastructure bill through the budget coordination process after entering the next fiscal year in October this year.