Oil whips around, gold steady above USD 1800

Oil goes on wild ride

Energy traders knew today was going to be a wild ride with another OPEC+ meeting, the weekly EIA crude oil inventory report, and as Ukraine-Russia tensions intensified. OPEC+ meetings are a big wildcard, with some meetings getting dragged out for days, while others end very quickly. Today’s meeting on output ended quickly, which means OPEC+ quickly shrugged away pressure from the Biden administration to significantly boost output and stuck to the gradual production increase strategy.  OPEC+ will save larger-than-expected production promises for when oil is over $100 a barrel.

Any oil gains quickly evaporated after Iran’s oil minister reiterated Iran is ready to boost our supply to the market as quickly as possible.  Iran’s posturing during nuclear deal negotiations should be taken with a grain of salt as Owji’s comments provided new insights.  Energy traders were not surprised and sold the OPEC+ announcement.  The oil market is not really any closer to seeing additional barrels of crude, but today we are not seeing any fresh catalysts to send prices to fresh highs.

The EIA crude oil inventory report showed crude stockpiles declined while gasoline demand softened. US production is also lower on colder weather and that might continue as Texas braces for an Arctic blast.

Gold

Gold prices continue to stabilize above the USD 1800 level as investors look to sell into any stock market rallies.  A choppy stock market session for the next week could be how things unfold as inflation pressures will complicate the outlook for many companies over the next couple of quarters.  Gold also got a boost after the ADP private payrolls report posted the first job loss since December 2020.

Geopolitical tensions are providing some underlying support for bullion as tensions at the Ukraine-Russia border intensify. The risks to the stock market outlook are also growing and that should lead to further safe-haven flows for gold.

Gold should find some resistance around the USD 1820-1830 area, as it seems difficult for gold to recover all of the Fed-driven losses from last week. Gold’s longer-term outlook is still for higher prices, but until we get past that first Fed rate hike, it will be hard for some traders to not sell into these rallies.

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