Oil prices are on a tear after OPEC+ talks collapsed on Monday without any agreement. After days of tense discussions and plenty of infighting between Saudi Arabia and the United Arab Emirates, the group failed to agree to ease output curbs, instead abandoning the meeting.
The immediate consequence of the breakdown in talks is that the oil supply increase the market was expecting won’t be happening. The additional 500,000 to one million barrels a day increase in production expected won’t be materialising for now. Given the oil market is so tight, prices are unsurprisingly on the rise.
According to OPEC, the demand outlook remains strong as economies reopen, with demand expected to pick up by around five million barrels a day in the second half of the year. Inventories have been draining for the past six weeks. Given the strong demand and limited supply, this is unlikely to change, highlighting the need for additional supply.
Both benchmarks trade fresh two-and-a-half year highs and have the potential to continue rising. The race to USD80 is expected to be faster than initially expected, and USD100 per barrel doesn’t look so farfetched amid infighting in the OPEC+ group.
Gold retakes USD1800
Gold is extending gains and has managed to clear the key psychological level, hitting a three-week high. The softer tone surrounding the US dollar combined with weakness in the equity markets is boosting the precious metal to levels last seen in mid-June.
Attention will now swing firmly to tomorrow’s FOMC minutes for further clues over the timing of the Fed’s next move. Friday’s US non-farm payroll data appeared to ease expectations of an earlier move by the US central bank. The question remains, will the minutes to the latest Fed meeting quickly reverse that thinking?
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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