Oil extends gains, gold in narrow range

Oil – Brent hits USD75

Oil prices only appear to go in one direction lately. Both oil benchmarks are on the rise on Wednesday as demand continues to outstrip supply. Thanks to successful vaccination programmes, economies are reopening, and fuel demand is ramping up. Strong demand is draining inventories, boosting oil prices towards fresh multi-year highs.

The API inventory data revealed a draw of 7.1 million barrels for the week ending 18 June. This was a larger draw than expected and came following an 8.5 million barrel draw the previous week. The fact that inventories are being drained highlights the mismatch between supply and demand.

Attention is now turning to OPEC+, which meets next week to decide its production strategy going forwards. Given the improving demand outlook and the fact that Iranian oil is unlikely to come flooding back to the market any time soon, there is a good chance that some OPEC + nations such as Russia will push for a production increase from August.

Gold edges unconvincingly higher

Gold trades in a narrow range, edging higher as investors continue to digest Federal Reserve Jerome Powell’s soothing comments, which stated the Fed wouldn’t hike rates on inflation fears. Powell’s confirmation that there will be no pre-emptive interest rate rise has enabled gold to find a floor and attempt a rebound, albeit a rather lacklustre rebound. At the end of the day, the damage was done last week when the Fed caught the market off guard with its hawkish shift. Despite Fed Powell’s dovish take on the Fed’s hawkish move, gold bugs aren’t taking the bait. After tanking 6% last week, a 0.3% rise today is barely touching the sides of the sell-off. USD1800 is acting as a clear line in the sand for the buyers. Even with a weaker US dollar, this level looks optimistic. While Fed speakers later today and PMI data could garner some interest, attention will start turning towards Friday’s PCE inflation numbers.

For a look at all of today’s economic events, please check out our economic calendar at www.marketpulse.com/economic-events/

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Sophie Griffiths
Sophie Griffiths is a market analyst with OANDA, focusing on the UK and Europe. With almost 15 years of experience, she brings with her a deep-seated understanding of the financial markets, providing timely and relevant fundamental analysis across a broad range of asset classes.
Sophie Griffiths

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