The UK economy may shrink 6-7% YoY in November, erasing recovery in the 3Q after the first wave of lifting social restrictions.

QoQ growth of the economy in the third quarter averaged 15%, but GDP growth slowed to 1.1% YoY in September, falling short of forecasts. In November, the economy is expected to contract further due to tightening of social distancing measure, but this failed to convince the Bank of England to prepare the markets for new round monetary easing, in particular negative rates, which were widely discussed in the market. The head of the Bank of England, Bailey, unexpectedly changed his stance, saying that although negative rates were discussed by officials, their deployment is premature. As a result, there may be a room for Cable to rise more, as the main fears for the British currency do not seem to be justified. GBPUSD after a short correction may resume movement towards 1.34, the highest level since September 1.

Oil prices turned into a slight correction after strong wave of demand on Wednesday drove quotes to their highest level since August. Thursday decline has been driven by the release of monthly OPEC bulletin, in which the agency predicted an additional decrease in demand by 300K bpd (9.8 million bpd for the full 2020 year). OPEC revised forecast of consumption growth downward due to weak demand in the US and lower consumption in Europe due to social restrictions. Oil demand for the next year was also revised down by 300K bpd and is expected to grow by 6.2 million bpd. YoY in 2021.

According to the agency estimates, the demand for oil produced by OPEC will amount to 22.15 million bpd. in 2020 and 27.37 million bpd. in 2021. Oil production in October reached 24.39 million barrels per day. That is, now OPEC produces oil in excess and reserves keep accumulating. In 2021, OPEC estimates the demand for its oil at 26.85 million barrels per day, which means the organization is likely to face an oversupply in the market if it does not decide to extend production quotas until the end of the first quarter of 2021. If OPEC decides to extend output quotas, given favorable expectations about the end of the pandemic, oil could easily go above $ 50 per barrel.

Later today, the IEA is to publish a monthly report on oil supply and demand, which is also expected to indicate a short-term decline in consumption. This will be followed by the release of the EIA report on commercial stockpiles in the US, which is expected to confirm the bullish estimate of the weekly drawdown in reserves from the API.

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