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Risk markets are enjoying some recovery this morning but, as expected, the balance of risks have been to the downside for crude oil, strategists at TD Securities report.

Key quotes

“The Monday global OPEC+ meeting was too optimistic for the group to reach a negotiated agreement, and the meeting has been pushed to Thursday.” 

“Prices are still holding relatively firm as optimism is high that an eventual deal will be struck, with many referencing the 10m bpd figure.”

“In our view, a double-digit cut is only plausible should the United States participate in the cuts, which at this point, seems to have a high hurdle for success as President Trump’s communications suggest the country is not ready to commit to such an agreement.

“With negotiations ongoing, two-way risks remain particularly high. Nonetheless, the longer it takes to come to an agreement the more inventories swell and the more detrimental the demand shock will prove to be, which suggests even a large cut will not be enough to offset the shock, at least in the near-term.”