Oil eases from high
Oil prices are pulling back slightly after gapping sharply higher on the open. After surging through USD70 for the first time since the pandemic started, Brent reached a peak of USD71.38 before easing lower. Meanwhile, WTI crude oil hit its highest level in over 2 years at just shy of USD68, before slipping back on a stronger US dollar. The dollar continues to receive support from higher US Treasury yields, with the 10-year and 30 year yields rising today.
The prospect of a solid economic rebound following the US senate approving the 1.9 trillion dollar Covid bill on the weekend, combined with rising political tensions in Saudi Arabia are underpinning the black gold. Attacks on Saudi Arabia’s oil industry are becoming more frequent, which is adding a risk premium to the price of oil. Let’s not forget that Sunday’s attack by Yemen’s Houthi forces on a Saudi oil facility is the second one this month and we are only 8 days in. This comes to a backdrop of a supportive OPEC+ meeting whereby the group agreed to leave output unchanged defying expectations of easing production cuts. There is little data to drive oil over the rest of the session so sentiment is likely to remain a key force.
Gold loses its shine
Gold remains unloved in the face of rising treasury yields. The precious metal’s attempted recovery back over 1700 was short-lived and the bears are once again firmly in control. With treasury yields rising to fresh yearly highs, non-yielding gold looks less and less attractive. Add in the strong US dollar and it is easy to see why investors are giving the precious metal a wide berth.
Technically, gold looks weak. It is currently testing support at 1690. A breakthrough this level could see 1650 come into play, a support seen back in early April.
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