Crude prices are stuck in wait-and-see mode until the energy traders have a better handle of what will be the full impact of Hurricane Ida with US production. Hurricane Ida pummeled Louisiana as a category strength hurricane, forcing over 1.74 million bpd, or 95% of Gulf of Mexico crude and natural gas platforms to shut-in.
Airlines across the board are cutting their schedules and the plateau for air travel is in place. Southwest announced bookings have slowed down. Concerns are brewing that we might not see strong holiday demand.
With the oil market still heavily in deficit, expectations are still high for OPEC+ to agree on Wednesday that the cartel can move forward with its planned October hike. The delta variant peak across much of the Southern states appears to be in place and that should support a steady improvement for reopening by October. With lots of demand uncertainty, OPEC+ can afford to be patient since peak driving season is behind us, corporate travel is not bouncing back just yet, and with an uncertain holiday travel season outlook. OPEC+ has built in enough of a cushion that this market is still nowhere near having supply concerns.
WTI crude should find some short-term resistance at the USD 70.50 level, but eventually will make a run at the July high.
Gold prices should rise on dovish Fed
The liquidity wave may last much longer and that should do wonders for gold. Fixed-income traders are buying ahead of the Fed and that is why Treasury yields will remain grounded. The playbook for gold is simple; the Fed has made it clear interest rate hikes are far away and that should prevent Treasury yields from taking off, thus denting demand for non-interest-bearing bullion.
Gold prices were unable to benefit from the broad risk-on rally that Fed Chair Powell triggered because demand for stocks were too good. Gold hit some key technical levels and will likely struggle in the short-term as investors prefer to go overweight with mega-cap tech stocks.
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