Commodities
Crude oil prices record gains after tropical storm hit Gulf of Mexico
Tropical Storm Sally picked up its strength in the Gulf of Mexico, west of Florida yesterday.
Crude oil prices began the first trading session of the week on a bullish note. The feat was triggered after a tropical storm in the Gulf of Mexico compelled major U.S oil producers to shut down their oil rigs, but the upsurge in crude oil prices were capped by growing concerns about the falling demand for gasoline.
At the time of this report, U.S. West Texas Intermediate gained 0.51%, to trade at $37.52 per barrel, and Brent crude prices were up 0.25% to trade at $39.93 per barrel.
Both crude oil contracts ended lower in the previous week, its second consecutive week of decline.
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Yesterday, Tropical storm Sally, picked up its strength in the Gulf of Mexico, west of Florida, and was turning to become a category 2 hurricane. The hurricane storm is disrupting oil supplies for the second time in less than four weeks, after hurricane Storm Laura swept through the Gulf coast.
What it means: Usually, crude oil prices surge higher when oil supplies are shut down, however, with the global exponential growth in COVID-19 caseloads, and oil demand falling momentarily, oil traders remain relatively cautious.
Stephen Innes, Chief Global Market Strategist at AxiCorp, in a note to Nairametrics, gave insights into the fundamentals, keenly monitored by oil traders.
READ: Nigeria, only oil producing nation that does not benefit from price increase – Sanusi
“Oil traders are back on hurricane watch, but it is all shoulders and heels while dancing to the tune of broader markets, amid more gloom on the supply-side,”
“Some Gulf of Mexico oil producers, on Saturday, idled production bracing for another hurricane brewing off Florida. But so far, the hurricane impact is getting offset by yet another gloomy short-term view that is likely limiting OPEC’s attempt to stabilize markets,”
READ: Oil prices rally higher, as U.S oil producers suspend operations in Gulf of Mexico
“Reports that Libyan commander, Khalifa Haftar gave his ‘personal commitment’ to reopen the energy sectors, could bring more barrels back to the market at the most unwelcome time of the year,”
“Unquestionably, this could put OPEC+ in an even more giant pickle, when they hold a virtual meeting on Thursday to review the current production intervention level’s price impacts.”
Commodities
Gold breaks below $1,800 per ounce, amid rising U.S Treasury yields
At the time of writing this report, the blinky metal at the futures market was trading at $1,796.40 per ounce.
Gold drifted below the $1,800 price level at the fourth trading session of the week due to higher U.S. Treasury yields. Also, U.S. Federal Reserve Chairman, Jerome Powell, maintained that the current ultra-easy monetary policy paused buying pressure on the yellow metal’s appeal.
At the time of writing this report, the blinky metal at the futures market was trading at $1,796.40 per ounce.
What you need to know: Usually, higher inflation boosts the price of the precious metal in principle, but also helps U.S Treasury yields (gold’s arch-enemy), which in turn helps the opportunity cost of holding the safe haven shinny asset.
READ: Gold suffers its worst January performance since 2011 amid rising U.S dollar
The U.S Fed Chief recommitted to getting the world’s largest economy back to full employment during his testimony before the House Financial Services Committee.
He tried calming fears about inflation in the $20 trillion powered economy, emphasizing that he would only start worrying about it if prices began to rise in an aggressive and troubling way.
Benchmark U.S. Treasury yields are currently at the highest levels in a year.
Stephen Innes, Chief Global Market Strategist at Axi, gave further insights on the political macro condition that could determine the precious metal’s future, at least for the midterm, knowing fully well that gold is priced in the U.S dollar.
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“Gold broke below USD1,800/oz. Such a break below that level this month has done some psychological damage to the market, I believe.
“On the political side, President Biden’s incentives look fully aligned with getting the US economy and populations as healthy as possible ahead of the 2022 mid-term elections.
“If both fiscal and monetary policy makes maximum efforts into a post-pandemic recovery, then at the very least we will get temporary inflation along with plenty of debate whether it might become more permanent.
READ: Gold fast losing the battle to Bitcoin
Bottom Line
Gold traders are not keen on going bullish, at least for the near term, on the bias that rising U.S Treasury yields see investors showing less interest in the yellow metal.
Commodities
Oil prices drop as gasoline demand from U.S refineries remain poor
Oil prices suffered significant losses at the mid-week trading session in London.
