Weaker overnight metal and oil prices will be a headwind for the ASX 200 this morning

The rally in oil prices over recent weeks creates downside risk leading into the OPEC meeting on Thursday. A buy the rumour; sell the fact reaction to an extension of the OPEC/Russia group production ceiling can’t be ruled out.

Traders are also beginning to contemplate the possibility that the oil production ceiling will be extended but set at a higher level. This may be a logical move for OPEC. It would provide continued certainty for the market, avoiding the sharp sell-off that could accompany a cold turkey exit. At the same time it would mitigate the risk to OPEC and Russia of precipitating further loss of market share by encouraging competitors with higher prices.

The reaction of bank shareholders to the likelihood of another banking inquiry may be a key to today’s market. As a minimum, the inquiry process will itself represent a cost to the banks putting some pressure on the already uninspiring profit outlook for the sector.  However, investors may wait on a sense of what recommendations will arise from the inquiry before making major risk adjustments.

Chart pattern followers will be alert to the possibility of CBA rejecting the support of a flag pattern over the next few days in a potentially bullish development.