Tight oil markets sends crude prices higher
Crude prices are climbing higher as traders continue to believe that the short-term delta variant jitters won’t change this market away from a deficit anytime soon. Even as German Chancellor Merkel raises concerns over the Delta variant spread across Europe, improving vaccination rates imply hospitalization rates won’t threaten their healthcare system. The oil market will remain tight and prices will accelerate higher once the trend of new curbs or restrictions starts to ease across Southeast Asia, Australia, and Europe.
According to Baker Hughes, US shale drilling appears poised to decline for the rest of the year and that should keep OPEC+ content in gradually raising output.
WTI crude appears poised to consolidate between the USD 70 and USD 75 level in the short-term.
Gold prices are slightly higher as Treasury yields drop following a higher-than-expected jobless claims reading. The weak release did not unnerve investors as seasonal adjustment factors may have played into the big miss. Many are attributing the soft reading to adjustments in the auto industry and as some states have returned to stricter COVID restrictions.
Gold continues to remain stuck around the USD 1,800 level and that will probably remain the case until after next week’s FOMC meeting. The debate over tapering will intensify and enough clues will be given to let this market know if the Jackson Hole Symposium in August is in play. Economists’ expectations are all over the place on when the Fed will make the taper announcement and what will be the pace.
Recent softness in some of the labor market readings and mixed signals on pricing pressures could help the Fed err on the side of caution and punt this meeting. Any dovishness from the Fed will be the fuel to help gold rally towards and potentially break above the USD 1,850 level.
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