Oil’s outlook, gold steadies

Oil poised to rise

Despite global recession fears, oil prices are poised to be supported as energy investments have been depressed. ​ The tug-of-war between crude demand destruction and a plethora of drivers on why the oil market will remain tight should still suggest prices won’t fall much lower. Oil’s outlook still looks positive here as shale is not taking off, ESG constraints remain, and strong demand for refined product exports. ​

US stockpiles will likely continue to decline over the coming weeks over strong export demand. ​ Oil prices could surge over the next few weeks if OPEC+ is forced to cut output and if Iran nuclear deal talks falter again. ​ The Saudis don’t want to see oil prices disconnected from market fundamentals and that should suggest this oil market will remain very tight. ​

Crude prices dipped after the EIA crude oil inventory report showed a dip with exports and as gasoline demand reversed. ​ Optimism for an Iran nuclear deal revival is growing and that is also weighing on prices today.

The longer-term outlook for oil is still much higher as the writing is on the wall for energy costs to be very high this winter especially as the risk for further disruptions remains elevated. ​ Energy traders saw prices get a boost after cracks were found with the key route for exporting crude from Kazakhstan to international markets. ​ It will take a month to replace the broken parts and they still have to find a contractor.

Gold

Gold firmed up after the dollar softened in what is a very low volume trading session. ​ Gold’s slide might not be over, but no one wants to aggressively be short right now. ​ Gold is forming its pre-Jackson Hole range and it looks like it could be in the $1740 to $1780 zone. Post Jackson Hole, traders should know enough as to whether the rise in yields continues and that will dictate what happens with gold.

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