Oil pares losses post OPEC+, gold rallies on Putin gas threat

Biden expected to order SPR release

Crude prices pared losses after OPEC+ decided “to stay the course” and maintained the gradual output increase strategy.  Oil was down earlier after reports that the Biden administration was considering a record reserve release of up to 180 million barrels from the country’s strategic petroleum reserve (SPR).  President Biden is feeling the pressure from Americans as inflation is getting uglier and this speculated release will show the public he is trying to get gas prices down with the exception of encouraging more drilling.  This proposed record SPR release could have also been a chess move to try to pressure OPEC+ into delivering more output, but obviously had no impact.

OPEC+ decided on sticking with the collective target of the 432,000 barrels a day in May.  The output targets have both Russia and Saudi Arabia approved to pump 10.549 million bpd, which probably doesn’t bode well for compliance.  This oil market will remain tight and any coordinated tapping of strategic reserves will only be effective if peace talks in the war in Ukraine are headed in the right direction.  If it becomes clear that a major de-escalation in the war is not going to happen, then oil could surge back to the recent highs.

Gold

Gold prices rose after President Putin said Russia will no longer supply gas to buyers from unfriendly states unless they switch payment to rubles by tomorrow.  This puts Europe in a tough position and raises the risks of greater pricing pressures.  Gold will remain headline-driven and seems poised to make another run higher as the latest Russian move on gas contracts suggests a breakthrough in peace talks seems very far away.

Gold will find major resistance at the USD 1970 level, but if that isn’t much of a barrier a clear path to USD 2000 could emerge.

The dollar also rallied against the euro following Putin’s decree on gas contracts and rouble payments.

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Ed Moya

Ed Moya

Contributing Author at OANDA
With more than 20 years’ trading experience, Ed Moya was a Senior Market Analyst with OANDA for the Americas from November 2018 to November 2023. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Prior to OANDA he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.