‘Very unconstructive’

Historically, demand for oil has been considered an important indicator of global economic growth prospects. The immediate market reaction to the OPEC+ announcement was to worry about the implications for the fight to slow inflation. US Treasury Secretary Janet Yellen described the decision as “a very unconstructive act at this time when it’s important to try to hold energy prices down.” However, we do not expect slightly higher oil prices to halt the broader global disinflationary trend, unless they reach a level closer to USD 100/bbl. The trajectory of labour markets is a much more important factor in the fight against inflation.

From a macro perspective, unless the global economy experiences more instability as we go through 2023, persistent US inflation in services and very tight labour markets suggest that the Federal Reserve will maintain its restrictive monetary policy, causing growth to slow and unemployment to rise, leading to some recessionary episodes later in 2023.

We therefore maintain a neutral exposure to risk and to a broad basket of commodities and the energy sector in client portfolios. Energy companies face a structural shift amid an accelerating sustainability transition. Shorter term, the OPEC+ cut should support more attractive valuations, and we continue to closely monitor conditions in the energy market.

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