Oil eases as focus turns to OPEC+ meeting
Oil prices are drifting after hitting a fresh two-year high as the new week kicked off. WTI crude oil rose to USD74.45 before easing back below USD74 as investors look ahead to the OPEC+ meeting later in the week.
Oil prices have rallied across the past five weeks, rising more than 15% since mid-May as demand outstrips supply. Fuel demand has rebounded firmly as economies have re-opened. Meanwhile, oil supply remains capped by OPEC+ output restrictions.
From May to July, the OPEC+ group is returning 2.1 million barrels a day to rebalance the markets following record curbs across the pandemic. Likely, OPEC+ will further ease production cuts during Thursday’s meeting. The surging demand story has caught everyone’s eye and will almost certainly respond. Expectations range from 250,000 to 500,000 additional barrels of oil output per day, which will keep the price supported. However, it could take an increase of more than one million barrels a day to really put any strong downward pressure on the price.
Gold looks to Fed speakers
Gold managed to book small gains on Friday after the Fed’s preferred measure of inflation, the PCE, increased by a smaller-than-expected 0.5% MoM in May. This offered some relief to non-yielding gold that the Fed might not be so rushed to start tightening monetary policy.
Fed speakers have been sending mixed messages. We know the Reserve is thinking about policy normalisation, but at the same time, Fed speakers are also insisting the spike in inflation is temporary, and there is no rush to start hiking rates.
With no US economic data for investors to focus on, attention will be firmly on John Williams and Patrick Harker, Presidents of the Federal Reserve Banks of New York and Philadephia, respectively, for further clues over the next steps.
Gold traders will be looking for a move outside the recent range of USD1760 and USD1800.
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