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Oil, Commodity Currencies Surge after Saudis Cut Output

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Note  The table above is updated before publication with the latest consensus forecasts. However, the text charts are prepared ahead of time. Therefore there can be discrepancies between the forecasts given in the table above and in the text charts. 

Rates as of 0500 GMT

Market Recap

Saudi Arabia stunned the markets by unilaterally announcing a 1mn barrel a day bd cut in production for February and March. The move came after OPEC agreed in its monthly meeting to reduce its production cuts if that makes sense to 7.125mn bd in February and March vs 7.2mn bd in January in other words, to increase production by 75k bd, of which Russia will take 65k bd and Kazakhstan 10k bd. The Saudi move is a return to the Kingdoms historical role as the swing producer in OPEC, adjusting its production to balance fluctuations in supply and demand. Thats not good news for Saudi Arabia, because previously, Saudi Arabia and Russia were moving in parallel. The fact that Saudi Arabia is cutting roughly 9 of its production while Russia is expanding its output means that Russia won. 

OPEC politics aside, the Saudi move had the desired effect, with oil prices surging even though the American Petroleum Institute API announced an unexpectedly huge increase in product inventories in the most recent week see below. The move engendered a general riskon mood with the commodity currencies up and USD headed lower. 

AUD and CAD tracked each other closely. Its surprising to me though that AUD gained…

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