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Morning Commentary: Oil agreement boosts EM assets; Hungary trades up; Russian economy improves
By Christine Van Dusen
Atlanta, Dec. 1 – Emerging markets assets improved slightly on Thursday after OPEC members agreed Wednesday to cut oil production.
“Yesterday, OPEC reached a first oil production cut deal since 2008,” according to a report from Schildershoven Finance BV. “Members of the cartel and main producers outside the group will cut its production by 1.2 million barrels per day.”
As part of the agreement, Iran will be permitted to increase its production to the level seen before sanctions, and Nigeria and Libya were exempted. Saudi Arabia will reduce its production by 210,000 barrels per day, Iraq by 210,000 per day and Russia by 300,000 per day.
“This is a strong positive announcement for the market,” Schildershoven said. “Oil prices jumped more than 10% on this announcement. Further dynamics will be correlated with OPEC’s members’ ability to follow the reached deal.”
Historically, Saudi Arabia, the United Arab Emirates and Kuwait have “stuck to their cuts while some other members fail to do the same,” the report said.
Latin American bonds were supported by the agreement, and slightly increased, a trader said.
In other trading Hungary’s 5¾% 2024 bond was up on Thursday morning at 109.875 and Poland’s 3% 2023 notes – which priced at 98.448 – traded at 98.50, another trader said.
Taking another look at Russia, bonds there also received support from manufacturing data, which showed signs of economic recovery, Schildershoven said.
The sovereign saw its price manufacturing index in November increase to 53.6 from 52.4 in October, the highest reading since March of 2011.
“The index showed the fourth consecutive month of expansion,” the report said.
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