Today commodities are rallying. The upside corrections come after the G20 Summit that completed this past weekend. The US softened its stance on trade with China, offering a 90-day truce on higher tariffs that were supposed to come into effect on US$200bn of imports into the US. China also said it will reduce tariffs on US cars and will commit to importing an undisclosed amount of US agriculture. Russia and Saudi Arabia agreed to continue their cooperation on managing oil supply through 2019, which we believe will be a precursor to the Organization for the Petroleum Producing Countries (OPEC) coming together to cut supply at its meeting later this week.
Qatar’s exit from the OPEC group in January (announced this past weekend) is likely to have little impact if Saudi Arabia (largest OPEC member) and Russia (largest OPEC partner) push for supply cuts. The Canadian province of Alberta has also announced it will cut oil production in an unorthodox move for a non-OPEC associated country, which will also counter any negative effects of Qatar’s exit.