Oil falls slightly, OPEC+ meeting looms
One corner of the markets that did not gain any love from the weaker greenback was oil markets. Both Brent crude and WTI fell modestly overnight, despite US API Crude Inventories printing another massive 4.5 million-barrel fall.
Brent crude fell 0.60% to USD44.95 a barrel, and WTI fell 0.50% to USD42.50 a barrel. Both contracts have reclaimed those losses in Asia today, rising to USD45.20 and USD42.70 a barrel. The appreciation of Asian currencies flushing buyers out of the woodwork for dollar-price black gold.
Oil markets likely have one eye on the OPEC+ Ministerial meeting today, which may be tempering bullish tendencies, although we expect no surprises. The contango in the Brent futures curve is the likely performance for oil’s reluctant to lock in further gains. It suggests that spot supplies are plentiful, and oil will struggle to move higher until the curve narrows.
Oil was an early mover in the V-shaped, buy everything, FOMO trade. With a lot of low hanging fruit priced into oil prices, and with OPEC+ gradually easing production cuts, oil will need more than just a weaker US dollar to inspire further material price gains.
Gold’s sell-off consigned to history
Gold’s emotional correction lower appears to be over as quickly as it began. Lower US yields and a much weaker US dollar internationally helped power gold to 0.85% gain overnight. It reclaimed the USD2000.00 an ounce mark on its way to closing at USD2001.50 an ounce.
Gold has retreated modestly today, falling to USD1995.00 an ounce, with fast money taking short-term profits, and liquidity reduced by Hong Kong’s typhoon induced absence from the morning session. Nevertheless, gold looks to be a buy on dips to the overnight low at USD1977.00 an ounce, as the drivers powering gold’s underlying rally return with a hiss and a roar. The overnight high at USD2015.00 an ounce forms intra-day resistance, and assuming the dollar continues to underperform; I see no reason why gold will not test this level later today.