Crude oil prices remained relatively stable at Tuesday’s trading session. Investors and oil traders stayed cautious, ahead of an OPEC+ meeting scheduled for Thursday.
At the time this report, Brent crude futures were a bit down by 0.1% to trade at $39.57, and WTI futures were lower by 0.03% to trade at $37.27. Both international benchmarks continue to remain below the $40 price level.
The resurgence of COVID-19 continues to distort the recovery of fuel demand, with the number of global cases exceeding 28.9 million as of September 15, according to the WHO.
On Monday, OPEC downgraded its demand forecast ahead of the OPEC+ meeting scheduled to hold in two days’ time. The meeting will discuss compliance with April’s production cuts, which were eased in August, but further cuts are not expected.
Stephen Innes, Chief Global Market Strategist at AxiCorp, in a note to Nairametrics, spoke on the recent downgrade in the outlook for oil demand amidst the resurgence of the COVID-19 virus.
“OPEC has also downgraded its outlook for global demand, which raises the obvious question of why they prematurely eased production cuts last month,”
“But will OPEC blink Thursday and fend off the oil glut, as the resurgence of coronavirus still weighs on the demand outlook? Price action so far says the market does not think so,”
“To a degree, some of this angst was expected after the initial demand rebound, and easing of emergency OPEC+ production cuts. Still, it will likely take 18 months or more to repair the damage done in H1, 2020.”
Crude oil prices are expected to recover slowly once economic activities rebound globally.
Crude oil prices post gains, OPEC+ warns overproducers
Both crude oil benchmarks remained above the $40-mark.
Crude oil prices rallied higher at most parts of Asia’s trading session on Friday. The recent price surge in crude oil prices is coming as OPEC+ concluded its meeting yesterday, with a stern warning to its overproducing members and energy speculators.
What we know: At the time this report was written Brent crude prices gained 0.81% to $43.65 and WTI futures were up 0.76% to $41.29. Both crude oil benchmarks remained above the $40-mark.
Why Oil prices are rallying up? OPEC+ Joint Ministerial Monitoring Committee (JMMC) meeting held on Thursday, revealed that OPEC+ members agreed to obey the 7.7 million barrels per day production cuts agreed on in the month of July.
In addition, Saudi’s Energy Minister, Prince Abdulaziz bin Salman, sent an unusually stern warning to both overproducing members (the United Arab Emirates in particular) and energy price speculators.
“Using tactics to over-produce and hide non-compliance have been tried many times in the past, and always end in failure,” Prince Abdulaziz said at the opening session of the OPEC+ committee that monitors the output cuts.
In an explanatory note, Stephen Innes, Chief Global Market Strategist at AxiCorp gave the following insights on Saudi’s battle against overproducing members:
Oil prices recovered after Saudi Arabia threw down the compliance gauntlet, publicly raking laggards over the coal and firing lightning bolts at short-sellers.
In a week where oil price fragilities were exposed after traders digested a combination of gloomy agency short-term forecasts, it was Saudi Arabia throwing down the gauntlet, publicly raking laggards over the coal while emphatically calling for OPEC+ members to meet their quotas that gushed oil prices to their most massive three -day advance since May.
During the OPEC+ Joint Ministerial Monitoring Committee (JMMC) meeting, Saudi Arabia’s Prince Abdulaziz bin Salman read the riot act to cartel members who cheated on production quotas.
And Russia’s Energy Minister Alexander Novak chimed in for good measure saying the group should continue to strive for high compliance.
Oil prices have recovered from recent lows, in line with a rebound in broader markets, but will remain sensitive to the pace of the global economic recovery and news about global supply.
Crude oil prices drop on fears of oil glut, OPEC meets today
U.S. West Texas Intermediate felly by 1.57%, to trade at 39.53/barrel, after gaining 4.9% yesterday.
Crude oil prices dropped at Asia’s trading session on Thursday morning, after rising in the two previous sessions. The slide was attributed to growing concerns on oversupplies after it re-emerged that some oil installations around the Gulf of Mexico are to resume production following Hurricane Sally’s passage.
Also, OPEC is scheduled to hold its meeting today.
What we know: At the time this report was drafted, Brent crude prices dropped 1.30% to trade at $41.76 a barrel, after surging as high as 4.2% on Wednesday.
U.S. West Texas Intermediate fell by 1.57%, to trade at 39.53/barrel, after gaining 4.9% yesterday.
The black liquid derivative price plummeted on the macro coming from a bigger-than-expected rise in U.S. distillate inventories, which include diesel and heating oil, that raised concerns about fuel demand in the world’s largest consumer of oil.
Stephen Innes, Chief Global Market Strategist at AxiCorp, in a note to Nairametrics, spoke on why all eyes now seem to be on OPEC’s all-important meeting, scheduled to hold today.
“Still, it will be crucial for the OPEC JMMC to manage the perception that compliance is an issue for the group and to send a strong signal that OPEC+ remains committed to a stricter level of laggard compensation and maintaining cuts for the full duration of the OPEC+ agreement.
“And buttressing a stouter compliance view, the new problem producer UAE has assured the group they will compensate for pumping too much oil for the past few months, which has further boosted sentiment.
“As far as the post JMMC impact, beyond reaffirming compliance and perhaps some resolution on catching up quota volumes, we should expect limited new news and certainly nothing to significantly bump the crude market out of its current funk and push brent back to $45 per barrel.”
However, the OPEC+ Joint Ministerial Monitoring Committee (JMMC) meets today, though it is not widely expected to recommend any changes.
Gold prices surge higher, traders focus on U.S. Federal Reserve
Gold futures edged up 0.46% to trade at $1975.30
Gold prices rallied higher during Wednesday trading session ahead of the U.S. Federal Reserve’s policy decision, which is due for announcement later this evening. Gold futures edged up 0.49% to trade at $1975.30 at about 13.00 GMT.
Traders are expected to focus their attentions on the U.S Federal Reserve bank, knowing if it will continue to maintain an accommodative approach towards inflation and keep interest rates lower for a longer period.
In addition, the drop seen in the U.S dollar Index on Wednesday helped stabilize the yellow metal at most parts of London’s trading session early on Wednesday.
What you should know; The precious metal is regarded as a safe-haven asset and popular during times of geo-economic uncertainty. It has gained significantly during the onset of the COVID-19 onslaught with prices reaching as high as $2,072 in August.
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Stephen Innes, Chief Global Market Strategist at AxiCorp in an email to Nairametrics spoke on the prevailing macros, gold traders and global investors are focused on.
“The Gold rally stalled as trader look to the FOMC for the next course of direction and projections, which extend to 2022. At the moment, records show only 2 of the 17 Fed members expect rates to move up in 2022.
“The main question for gold investors is that with improving data and a vaccine on the horizon, how many Fed members will start to whistle a less dovish tune and bring forward rate hike expectations.”
He explained that this could be where the policy debate most likely centers. But for gold to go significantly higher, he added that the Fed must make a credible promise to act full dove and aggressively drive inflation expectations higher.