A breakdown in OPEC would have broad macro effects

<p>There is still a high chance that OPEC+ comes to an agreement on supply as higher prices are positive for all oil-producing countries. However, there appears to be a real sticking point over country quotas, particularly in Africa.</p><p>If the talks become heated enough, producer discipline could break down or Saudi Arabia could withdraw its 'lollypop' additional 1 million barrel per day cut. If so, there is the risk of material downside in oil.</p><p>If were were to see a breakdown in OPEC, oil could easily fall in to the $50s, which would be sharply disinflationary. I think it would be the nail in the coffin of the 'sticky' inflation argument. Aside from shorting oil, the obvious trades on it would be:</p><ul><li>Buying bonds</li><li>Selling the US dollar</li><li>Buying equities</li></ul><p>I could make the case for a half-dozen other trades as well (gold, for one should do well on rate cuts) but the overall theme would be to supercharge the moves we've seen in November.</p><p>Where would I put the odds? Maybe 1-2%… but that's higher than it was before <a href="https://www.forexlive.com/news/opec-talks-difficult-further-delay-in-meeting-possible-report-20231128/" target="_blank" rel="follow">the latest OPEC headline</a>. </p><p>Right now, we're seeing some of that come into the FX market with the euro and pound both at the best levels of the day and some moderate USD weakness.</p>

This article was written by Adam Button at www.forexlive.com.