10 March 2022
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UAE proposes OPEC Plus boosting oil production

By Edward Bell

  • The UAE has proposed that OPEC+ increase oil production at a faster pace than its current 400k b/d monthly target in light of the volatility in oil markets caused by the war in Ukraine. OPEC+ showed no overt acknowledgement of the tightness in oil markets at present when they met earlier this month and haven’t responded to pressure from importing nations to add more production back to the market. The UAE had pushed for larger production allocations last year as the previous OPEC+ targets failed to take account of higher capacity levels in the country thanks to heavy upstream investment.
  • The JOLTS report for January in the US showed that the number of job openings fell slightly to 11.3m from 11.4 a month earlier while the number of quits fell to its lowest level in three months. Along with the February non-farm payrolls that showed no monthly increase in wages, the JOLTS report gives a sign of a labour market that is starting to ease up after shortages caused firms to raise wages to scramble after any available workers. Should a trend of a more normalized labour market and modest wage growth persist, it will give room for the Federal Reserve to carry out a steady path of rate hikes as it targets inflation.
  • Producer price inflation in Japan soared to 9.3% for February from year ago levels and also accelerated from levels in January. The jump is in line with moves higher in global commodity prices, even ahead of most of the war in Ukraine. Energy prices in the index rose more than 34% from year ago levels. However, on consumer inflation Japan remains an anomaly with persistently low levels of price gains. That should serve to keep Bank of Japan policy on hold for the remainder of the year.

Today’s Economic Data and Events

  • 16:45 ECB Deposit facility: forecast -0.5%
  • 17:30 US CPI y/y February: forecast 7.9%
  • 17:30 US Initial jobless claims Mar 5: forecast 217k

Fixed Income

  • Improving market sentiment and a recovery in risk assets helped to push US Treasuries and comparable benchmark bonds lower overnight even as there appears to be no imminent de-escalation of the war in Ukraine. Yields on the 2yr UST added 8bps overnight to settle at 1.682%. On the 10yr yields added almost 11bps to close at 1.955%. In other markets the moves were on par: 10yr bund yields added more than 10bps to close at 0.210% while similar maturity gilts added 8bps to settle at 1.523%.
  • The improvement in risk appetite helped emerging market bonds, to a degree. South African 10yr yields fell 21bps to 10.44% after some selling pressure earlier in the week while emerging European bonds remain on an anxious footing. Indian yields turned lower on the day, settling at 6.844% overnight.


  • The recovery in risk appetite helped to sink the dollar against other peers overnight. The DXY index fell by more than 1% to settle at 97.968, shedding much of the past week’s gains. EURUSD propelled higher, up by 1.6% to 1.1076 as markets seem to want to price in ceasefire conditions, even if they haven’t materialized yet. USDJPY moved another leg higher, adding 0.14% to 115.84 while GBPUSD gained 0.6% to close at 1.3181.
  • Commodity currencies generally were stronger despite moves lower in raw material prices. USDCAD moved in favour of the loonie, falling by 0.59% to 1.2809 while AUDUSD rose 0.7% to 0.7322 and NZDUSD closed up 0.48% at 0.6839.


  • Global equity markets enjoyed a risk-on rally yesterday, with major indices recouping some of the losses endured earlier in the week. Notable gainers in Europe were the DAX and the CAC which added 7.9% and 7.1% respectively, while the FTSE 100, which had lost less previously, gained 3.3%.
  • In the US, the Dow Jones (2.0%), the S&P 500 (2.6%) and the NASDAQ (3.6%) all closed higher, and the gains have continued in early trading in Asia – the Nikkei was up 3.8% at the time of writing.
  • Local markets were outliers once again. Having performed more strongly earlier in the week as oil prices soared, there were some losses yesterday as sentiment turned. The ADX lost -2.2%, while the DFM (-0.8%) and the Tadawul (-0.9%) also declined.


  • Oil prices wilted on news that the UAE was considering raising production at a faster pace than the current OPEC+ targets. Brent futures fell 13% to USD 111.14 while WTI dropped more than 12% to USD 108.70/b. The size of the moves, on relatively modest headlines, highlights the inherent volatility of oil markets at this time.
  • While the announcement from the UAE would help to alleviate pressure in oil markets, time spreads still show the perception of an enormously tight market. In Brent 1-6 month spreads, the backwardation fell to “only” USD 15.59/b overnight, still among its widest levels on record.
  • Weekly data from the EIA showed a drop in US commercial crude inventories, down by 1.9m bbl last week to 411m bbl. Oil production held steady at 11.6m b/d while demand nudged up by 380k b/d to 21.21m b/d.

Click here to download charts and tables


Written By

Edward Bell Head of Market Economics

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