US crude inventories surge
Energy has dominated the headlines for the past 24 hours. Yesterday, the EIA crude oil inventory report showed stockpiles surged to a record with a 21.6-million-barrel build, as refiners take longer to restart. Exxon Mobil’s investor day showed a focus on their energy transition plan with plans to see 2025 production remain steady in 2025 with this year’s output.
Today is all about the OPEC+ meeting on future production and possibly a massive move against the dollar if Fed Chair Powell pushes back on the bond market’s skepticism that the Fed can remain ultra-accommodative. It is clear energy markets want to take prices higher and are somewhat expecting the Saudis to surprise us.
Brent crude rallied after Saudi Prince Abdulaziz’s opening statement called for OPEC+ to keep some of its powder dry. The Saudis are posturing here and are probably pushing for no increase in output right now. Russia’s Novak is the leading voice for a substantial output increase.
The crude demand recovery warrants more output, but if the group collectively agrees upon an increase of 500,000 barrels for next month, that could provide a sell the news reaction.
Gold is slightly softer ahead of what should be another dovish commitment from Fed Chair Powell. Gold is having a terrible year, down almost 10%, and still looking very vulnerable. Gold bulls are getting dizzy as they look over a cliff of price action that could see another USD100 of weakness. If the bond market continues to ignore the Fed, gold could be in for a few rough weeks. The Fed should save the day for gold bulls, but nervousness remains elevated.
Gold ETF holdings continue to plunge down for a 13th straight day. Silver is also seeing some ETF positions reduced.
Gold’s fundamentals however are improving as central banks are buying again and as jewelry demand is expected to bounce back.
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