Oil rises ahead of OPEC

Oil prices are charging higher for a third straight session, boosted by falling inventories as investors look ahead to the OPEC+ meeting today.

WTI crude oil has had a stellar month, surging more than 10% across June as economies reopened and demand picked up. Both benchmarks have reached two-and-a-half-year highs amid successful vaccine programs, rising mobility and increasing fuel demands against limited supply.

OPEC is easing deep supply cuts implemented across the pandemic. However, the fact that oil inventories continue to be drained indicates that more output is needed.

OPEC sees demand rising by five million barrels a day in the second half of the year, providing plenty of wiggle room as far as raising output is concerned.

The OPEC+ group is widely expected to raise production by 500,000 to one million barrels per day. Given the strength of the oil demand outlook, an increase of supply around these levels could be comfortably absorbed by the market.

A surprise decision, such as a larger-than-expected increase in production, or indeed no change to output, could overwhelm the technical picture. Technically, the outlook for oil is bullish.  As long as WTI crude oil price remains above USD70.00, the uptrend remains intact.

Can gold sustain its recovery?

Gold is building on yesterday’s gain, staging an impressive rebound from Wednesday’s USD1750 low. Sentiment towards the precious metal has improved amid ongoing uncertainty surrounding the spread of the Delta Covid variant in Asia and the UK. However, gains are likely to be capped given US dollar strength and the strong rise in equities. It remains to be seen if gold can sustain its recovery over USD1770.

Investors are increasingly cautious ahead of today’s PMI data and tomorrow’s NFP print. Upbeat numbers could ramp up the pressure on the Fed to hike rates, negatively impacting gold.


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