Oil higher but losing momentum
Oil prices are edging higher today but once again there does appear to be flagging momentum in the rally, perhaps a sign that we’re heading for a correction in the incredible four-month bull run. Prices have rebounded more than 75% for a multitude of reasons and given the expectations for the pace of the recovery, there’s good reason to think it isn’t over.
But with momentum appearing to slow a week before the next OPEC+ meeting, crude may be positioning for a small correction, which under the circumstances would be quite healthy. There’s still plenty of downside risks in the market and one of them is OPEC+ unity coming under strain in the coming months.
Higher oil prices and a much improved economic outlook doesn’t just provide an opportunity for the group to pare back production cuts after almost a year of coordinated action, it also increases the risk of US shale doing so, something that members will be all-too-aware of. And that may make an agreement that much harder to come to. We saw the sacrifice Saudi Arabia had to make in January to get it over the line. We can’t expect that to continue.
Gold slides on higher yields
We’re seeing some interesting moves in gold on Thursday, with the yellow metal slipping around 0.7% despite the dollar index also being off around 0.5% and below 90. While the greenback does once again find itself out of favour, US yields are still rising which is likely why gold is also not feeling the love.
Gold recovered from below USD1,800 on Wednesday to end the day just above here but it’s under pressure once more today and continues to look vulnerable despite what we’re seeing in the dollar. The dollar move is interesting because 90 appears to be such a significant support level, but gold is not buying into it at the moment. It will be interesting to see which of these has legs.
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