Don't Count out OPEC

Not all markets are equal and while it's tempting to doubt OPEC, the oil market has a way of breaking the rules. The Canadian dollar was the top performer Monday on a rally in crude while the yen lagged. Kuroda speaks later. A new Premium Video will be posted ahead of the Tuesday London session.

Oil ministers from Saudi Arabia and Russia sent crude prices nearly $2 higher on Monday by saying they hoped to extend the current quotas until March 2018. An extension to year end had been generally expected and there were rumours of a longer or larger production curb so it wasn't entirely a shock but it certainly provided a jolt.

Along with crude rising, USD/CAD dropped to 1.3600 from 1.3675. Then disappointment set in, crude and CAD both cut the moves in half. The temptation is to now bet against OPEC. They've shown their hand so when the moves come it shouldn't be a surprise.

But we're reminded of two big previous OPEC announcements. The most-recent one was on November 30 when OPEC first announced a supply cut agreement. By the time it was announced it had already leaked and been rumored for at least a week. And yet when the headlines finally hit, oil jumped. The gains continued in the next two weeks as crude climbed more than 10%.

It's not the first time that oil waited for the official OPEC word before moving. In December 2015 OPEC left quotas unchanged. It was even less of a surprise and had been wholly telegraphed. Yet crude fell a whopping 5% that day and a total of 33% by mid-January.

It could be that oil hedgers wait until the official announcement before they pull the trigger. It could be something else, but there is enough history to show that betting on something being 'priced in' to oil is a risk.

The OPEC meeting is May 25.

In the near-term, the Asia-Pacific calendar is generally light but it's punctuated by an appearance from Kuroda at a WSJ meeting at 0455 GMT. USD/JPY above 113.00 is close to the BOJ's sweet spot so he may avoid commentary on the yen.