Crude rally continues, gold edges lower

Oil trades at yearly highs

Oil prices are extending gains for a third straight session, trading at a yearly high as the OPEC+ group maintained their stance earlier in the week and demand expectations for the second half of the year rise.

On Tuesday, OPEC+ confirmed they will boost output in July in line with the plan announced in April, amid a rebound in oil prices.

The demand outlook is strengthening significantly, boosted by the US, China and Europe. The broad expectation is that oil demand will exceed supply in the second half of the year. OPEC+ data revealed that oil demand is expected to be 99.8 million barrels per day against a supply of 97.5 million. This equation supports a firmer price.

Demand is expected to continue to rise in the US, the world’s largest oil consumer, with a strong summer driving season on the cards. Meanwhile, China’s fuel demands are also on the rise. The UK is already looking at pre-pandemic traffic levels.

Meanwhile, after the initial knee-jerk reaction surrounding US-Iran nuclear talks, this now looks like it will be a slow burner.

EIA crude inventory data is due later and is expected to show a decline in stockpiles.

Gold trades at weekly lows ahead of busy US docket

Gold failed to capitalise on yesterday’s gains and is edging lower. The precious metal trades at the lowest level in a week, dragged lower by signs of a slightly more hawkish Fed and a rising US dollar. Investors have been growing nervous over whether the US Federal Reserve will move earlier on tightening monetary policy. Strong US economic data combined with Fed Harker’s call for tapering asset purchases have raised expectations that the Fed could move sooner rather than later. As a result, the US dollar is on the rise, pressuring dollar-denominated commodities. A modest uptick in bond yields is aiding the flows out of the non-yielding precious metal.

Attention will turn towards the busy US economic calendar. All eyes will be on the ADP private payroll report ahead of Friday’s all-important non-farm payroll, the ISM services PMI and weekly jobless claims for further clues.

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