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OPEC rolls over, Greece delays payment and NFP’s exceed expectations

Published Monday, June 8th, 2015

Three important and market sensitive questions were answered on Friday, only one of which met expectations. OPEC made no change to the strategy it first adopted last November and will not cut production to support the oil price. The key US non-farm payroll number for May came in way above expectations at 280,000 and the Greek government chose not to meet its debt repayment obligation to the IMF deciding instead to delay and consolidate the 3 payments due over the next 3 weeks to later in the month. This came as a surprise as Alex Tsipras had assured Christine Lagarde shortly before the first payment deadline on June 5 that the IMF would be paid on time.

The OPEC decision was unequivocally bearish, as was the dollar strength that followed the release of the payroll numbers, but Brent ended the day higher at $63.31 for a gain on the day of $1.28 and WTI gained $1.13 to close at $59.13. There are all sorts of reasons being bandied around as to the cause of such a perverse reaction, from the unwinding of options positions to profit taking from shorts determined to cash in on the event. Whatever the cause, as always, the initial price response is not to be trusted.

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Posted by David Hufton