Oil steady but outlook much more bullish
Oil prices are relatively steady today after surging over the course of the last week, taking gains from 2 November lows to 28%. It’s a remarkable, but understandable surge in crude, with promising news on both the demand and supply side giving it a massive boost. The vaccine is responsible for the bulk of the surge but comments from the Saudi Energy Minister on the prospect of tweaks to planned production increases gave WTI and Brent an extra kick higher.
Not wanting to be buzzkills, the IEA did offer a sense of reality to markets this morning, warning that fuels won’t see a significant boost in demand until the second half of next year. All the more reason for OPEC+ to tweak the timetable for paring back production cuts next year, as numerous countries go back into lockdown. That forced the IEA to reduce demand forecasts for crude by 1.2 million barrels per day in Q4.
With prices now back above USD40 and in far more comfortable territory, there’s no rush for emergency announcements prior to the next OPEC+ meeting in a few weeks, when you’d expect changes will be made. IEA expects oil demand to have fallen 8.8 million barrels per day this year before rebounding by 5.8 million next year.
Gold struggling to recover from vaccine news
Gold is struggling to recover from its plunge earlier this week. The vaccine news pulled the rug from underneath the yellow metal only two days after it finally broke through the upside of its post-summer range. Gold fell more than 5% from its peak on the day before finding some support around USD1,850 – its three-month lows – where it has lingered around since.
The near-term risks for gold are once again tilted to the downside. More positive vaccine news is expected this year and, given how Treasuries and the dollar responded since Monday, it’s clear this isn’t particularly good news for gold. A break below USD1,850 could generate quite an aggressive initial response, with a test of USD1,800 potentially following very soon after.
For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/ 
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