Oil gains on tight supplies, China concerns
Crude prices rallied as energy traders focus on the supply-demand imbalance that shows no signs of easing and shrugs off China COVID concerns and the early signs of crude demand destruction in the US. Gasoline prices are above five dollars a gallon nationally and no relief is expected anytime soon. Refiners need to get diesel inventories higher otherwise we could see some shortages in the near future.
President Biden will visit Saudi Arabia in the middle of July, but that relationship is nowhere near being repaired and expectations for some agreement for more Saudi oil production seems very unlikely. The oil market remains supported here and until demand destruction becomes more noticeable, crude prices will remain supported.
Gold prices are consolidating above the USD 1800 level ahead of Wednesday’s FOMC decision. The FOMC decision will deliver the moment for gold traders. Traders are trying to calculate how aggressive the Fed will be with raising interest rates for the rest of the year.
Gold got a mini boost after a report on producer prices showed promise as core prices continue to come down from the peak. Regardless of how hawkish Powell is at the post-FOMC decision conference, a widening interest differential for the dollar against its major trading partners will make life hard for gold over the short-term. A break of the USD 1800 level might not see much support until the USD 1765 region.
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