Opec+ to meet to consider oil output cuts; French economy shrinks

Introduction: Opec+ meeting in the spotlight today

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

To cut or not to cut? That is the question facing Opec+ today as the oil cartel meets (virtually) to set production levels.

Opec and its allies are expected to try to agree to cut the amount of crude oil they pump, in another attempt to prop up prices as demand weakens.

But there’s an unusual lack of consensus within the group, so analysts aren’t sure what to expect today.

This afternoon’s meeting has been delayed from last Sunday, due to a disagreement over output quotas by the African oil-producing countries.

And yesterday, the Wall Street Journal reported that Opec and its Russia-led allies are considering new oil production cuts of as much as 1 million barrels a day. That would be around one percent of global demand.

But some members may not support a cut, as Stephen Innes, managing partner at SPI Asset Management, explains:

There is increasing speculation that deeper OPEC+ cuts may encounter strong resistance, particularly from the United Arab Emirates and African producers such as Angola and Nigeria.

These countries resist accepting lower production baselines, even under weaker market fundamentals. The dynamics within the OPEC+ alliance continue to play a crucial role in determining production policies and addressing global oil supply challenges.

Opec+ has already been cutting output over the last year, and has removed around 5 million barrels per day, despite pressure from the White House to pump more to bring down motor fuel prices.

And Deutsche Bank has pointed out that if Opec+ don’t cut output, then the global oil market would move into an oversupplied position in early 2024, given oil demand growth and rising non-OPEC production.

Also coming up today

We find out today if inflation in the eurozone kept falling this month. The CPI index is expected to drop to 2.7%, from 2.9% in October, closer to the European Central Bank’s target of 2%.

There’s also new eurozone jobs report, while Canada will become the last G7 country to report GDP figures for the third-quarter of 2023 today.

The agenda

8.55am GMT: German unemployment
10am GMT: Eurozone flash inflation report for November
10am GMT: Eurozone unemployment report for October
1.30pm GMT: US weekly jobless claims
1.30pm GMT: PCE measure of US producer price inflation
1.30pm GMT: Canada’s Q3 GDP report to be released
3pm GMT: Opec virtual meeting expected to start

Key events

It’s possible that Opec+ members fail to agree any output cuts today, and simply maintain output at current levels.

Bloomberg explains:

Group leader Saudi Arabia is pressing fellow alliance members to join it in restraining supplies in order to stave off a renewed oil surplus next year. A deeper collective cutback of 1 million barrels a day or more will be discussed when ministers from the Organization of Petroleum Exporting Countries and its allies hold their video conference, delegates said.

Yet obstacles to an accord remain — most notably, a dispute over whether African members Angola and Nigeria should accept reduced output targets to reflect their diminished production capabilities. The stalemate has meant that Thursday’s gathering is being held four days later than originally planned.

Failure to resolve the issue could result in a so-called rollover at the meeting, in which members maintain output at current levels, delegates said.

Sarah Butler

In the City of London, shares in footwear maker Dr Martens have plunged by 25% after it issued its fourth profit warning this year.

A tough consumer environment in the US continues to affect sales of Dr Martens sturdy boots.

The Northamptonshire-based footwear brand said sales fell 5% to £396m in the six months to 30 September and pre-tax profits dived 55% to £26m. While this was better than City analysts had expected, the company warned that the outlook for the following six months had worsened because of a slower than hoped for recovery in its US business.

At 85p, shares are over 75% lower than the 370p float price in January 2021.

Sales for the full year are now expected to fall by about 8% and underlying profits to drop back below the £223.7m minimum expected by the City – continuing the slide seen since the company listed on the London Stock Exchange in January 2021.

More here.

The “trend towards disinflation” is well underway in France, says Charlotte de Montpellier, ING’s senior economist for France and Switzerland, after inflation dropped to 3.4% this month from 4% in October.

There are worrying economic signs from China today, where factory activity has contracted for the second month running.

The official purchasing managers’ index fell to 49.4 in November from 49.5 in October, National Bureau of Statistics data showed today, further below the 50-point mark showing stagnation.

Economists had expected a small rise to 49.7 (showing a slower contraction).

Dan Wang, chief economist at Hang Seng Bank China, blames a slowdown in global demand.

“The domestic market cannot make up for losses in Europe and the United States. The data shows that factories are producing less and hiring fewer people.”

Growth in China’s non-manufacturing section of the economy slowed, with its PMI weakening to 50.2 in November from 50.6 in October.

Kyle Rodda, senior financial market analyst at capital.com, says:

Further evidence for China’s half-baked economic recovery came from today’s PMI surveys, which revealed an unexpected drop in manufacturing and non-manufacturing activity.

In better news from France, inflation has fallen… and by more than expected.

Over the last year, the Consumer Price Index (CPI) is estimated to have risen by 3.4% in November 2023, down from 4.0% in October, French stats body INSEE says.

During November alone, prices are estimated to have dropped by 0.2%.

On an EU-harmonised basis, French annual inflation dropped to 3.8% this month, down from 4.5% in October.

French economy shrank 0.1% in Q3, worse than thought

Newsflash: The French economy shrank unexpectedly in the last quarter, as the eurozone economy teeters on the brink of recession.

Updated GDP data just released shows that France’s economy contracted by 0.1% in July-September.

That’s worse than the first estimate of 0.1% growth for Q3, and follows growth of 0.6% in Q2.

The new data shows that French investment and consumer spending were weaker than initially expected.

INSEE, the statistics body, says:

The purchasing power of households gross disposable income (GDI) per consumption unit fell slightly (-0.2%) after remaining stable in the previous quarter. The household saving rate fell this quarter to 17.4% of GDI, after 17.9% in the previous quarter.

Trade also pulled GDP down, with exports falling by 1% while imports were stable.

French economy slips into contraction in Q3 by -0.1%, headline CPI slows to 3.4% in November

— Michael Hewson 🇬🇧 (@mhewson_CMC) November 30, 2023

The wider eurozone economy also shrank by 0.1% in the last quarter, according to statistics body Eurostat.

Oil up ahead of Opec+ meeting

Brent crude has hit a two-week high this morning, as traders brace for today’s Opec+ meeting.

Updated: It traded as high as $83.85 per barrel, +0.9%, the highest since 14 November, following yesterday’s report that Opec+ was considering cutting production by as much as 1 million barrels a day.