Can OPEC Live Up to its Promise?

After agreeing to cut production by a significant amount following round-the-clock talks, the initial optimism proved immense, with oil prices rallying on the announcement. Oil prices continued to climb in early Asian trade, but as traders digested the news, those gains were pared. Market participants became increasingly cautious about the details of the deal and the extent to which it would be imposed, given the history of OPEC flouting its own production quotas. With no enforcement mechanism in place, it will be hard to prevent cheating. Furthermore, the deal has not been ratified yet and will not be approved until the November OPEC meeting, meaning that oversupply will persist over the near-term. Considering Iraq is already questioning how OPEC is calculating output and gaps between members remain, the deal still has ample room to fall apart.

The US Federal Reserve is not following a "fixed timetable" to alter its current accommodative monetary policy according to Chairwoman Janet Yellen during remarks before Congress yesterday. Yellen's testimony comes close on the heels of the Fed’s decision to hold the Federal Funds rate steady at 0.25% to 0.50%. Yellen forecast that eventually, if job creation continued at the pace it is growing, the economy would overheat, which is when she expects the Central Bank to intervene. Recent comments from Donald Trump of a politicized Central Bank saw lawmakers grill Yellen on potential conflicts of interest. Yellen briefly clarified during her remarks on Wednesday that she was not aware of any contact between Democratic presidential nominee Hillary Clinton and Fed Governor Lael Brainard. Investors closely watching Yellen's last night’s comments for any fresh clues about timing of the next rate hike were unfortunately disappointed.