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.

This article 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 Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. 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. Most recently 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 and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya