Oil keeps pushing higher, gold above $1,800

OPEC+ in no mood to take the heat out of the oil market

Oil prices are up around 1% at the start of the week, buoyed by comments from Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman who pushed back at suggestions that output should be ramped up faster than currently planned. Governments around the world are clearly concerned about oil prices which naturally puts a target on the back of OPEC+ as the group is still pumping well below pre-pandemic levels.

But producers have proceeded cautiously until now, despite high prices, increasing production by 400,000 barrels per day, each month, and the latest moves are clearly doing nothing to convince them to do more. They have made clear the uncertainty around the near-term outlook as a winter Covid surge triggers more restrictions and changes in behaviour that could weigh on demand over the period.

Soaring natural gas prices today may also be contributing to the moves in oil, with colder weather driving further demand for alternative energy sources. Oil demand is already expected to be at least 500,000 barrels per day higher as a result of the gas shortage and that number could rise, depending on the weather. Colder weather expectations for the next two weeks has been attributed to the 10% jump in natural gas prices today which may highlight just how sensitive they’ll be to forecasts in the coming months.

Gold back above $1,800 but can it hold on this time?

Gold failed to hold onto gains above $1,800 into the close last week, perhaps a sign of vulnerability at those levels and a negative indicator going into this week. But prices are on the rise once more today and the yellow metal is up a little under 1% a little shy of $1,810.

While that may be encouraging, it’s yet to surpass Friday’s peak and there’s still plenty of time to give back those hard fought gains. Another failure to hold on could highlight some underlying weakness in the market and point to an impending correction.

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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.

Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.