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Commodities
Oil prices trading at their highest levels since February 2020
Both major benchmarks traded above the $50 mark and are trading at their highest levels since February 2020.
Crude oil prices rose to their highest level since February, with the U.S crude seeing the seventh day of gains.
The recent gains in oil prices are triggered by reports of an impressive drop in U.S. crude oil stockpiles, which helped boosting oil traders’ sentiment on energy demand.
What you should know: At the time of writing Brent oil futures gained by .34% to trade at $57.34, after picking up nearly 2% yesterday. West Texas Intermediate futures rallied by 1.22% to $53.86, having risen 1.7% in the previous session.
- Both major benchmarks traded above the $50 mark and are trading at their highest levels since February 2020.
- Recent data from the American Petroleum Institute showed a drop of 5.821 million barrels in U.S. crude oil supplies for the week ending Jan. 8.
- The draw was larger than the 2.7-million-barrel draw in forecasts anticipated by oil experts as well as the 1.663-million-barrel draw reported during the previous week.
Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics spoke on the macros supporting oil prices at least for the near term;
“Crude oil rallied to pre-pandemic levels. Brent traded as high as US$56.75 after bouncing on a larger crude draw than expected. A weaker US dollar helped and complimented numerous price revisions by several analysts for still higher 2021 estimates on the tailwind from the surprise 1mb/d cut announced by Saudi Arabia.
“The remainder of this week’s currency action now sets up for a weaker US dollar through a droop US CPI print and via Fed Chair Powell’s dovish lens which will be oil supportive as oil is priced in dollars. This dynamic is already playing out in Asia this morning.
“While the higher oil prices story continues to make sense, I suspect China’s rapid response to the outbreak”
What to expect: Oil traders anticipate sizable scrutiny as to whether WTI over $50 will prompt increased investment or whether a conservative financial strategy prevails,” Innes added.
- Also, as money flows to where investors can make profits and the higher oil price go, not only will Shale producers be keen to turn up the taps but so will OPEC+.
Commodities
Gold prices pull back after hitting highest levels in 2 weeks
Spot gold was down by 0.4% to trade at $1,862 per ounce after hitting its highest since Jan. 8 at $1,874.50 earlier in the session.
Gold prices pulled back a little of its gains recorded on Thursday, as it traded near its highest level in nearly two weeks.
The greenback’s slight rebound at Asia’s trading session on Friday dented the precious metal’s upsides.
Gold prices have been rallying high on reports that President Joe Biden’s administration would push for more quantitative easing programs in order to support the world’s biggest economy.
READ: Gold rebounds strongly amid COVID-19 crisis
At the time of drafting this report, Spot gold was down by 0.4% to trade at $1,862 per ounce after hitting its highest since Jan. 8 at $1,874.50 earlier in the session.
What you must know: It’s key to note that the precious metal typically moves in the opposite direction from global stock markets, especially the American and European stock markets.
- Humans are emotionally and physically drawn to gold. It provides a significant store of value.
- Global Investors buy gold mainly to hedge against inflation.
READ: Gold on a grand slam win, gains $40 per ounce
Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, spoke on the recent price movements prevailing at the precious market;
“Gold bears have entered a temporary state of hibernation. The yellow metal seems to be past the lows for the month as the current ” everything but the kitchen sink ” policy backdrop and FX tailwinds for precious metals remain favorable.
READ: Gold rockets above $1850 as it continues 9-year high
“Resistance lies at the 100-day moving average at $1884. But the market needs a few more ounces of policy conviction for a break higher. Treasury yields should dictate the direction of bullion and a rally could quickly ensue if further inflation expectations kick in.”
Bottom line: The yellow metal bugs are still in play, at least for the slightly longer horizon, given that global central banks are likely to stay dovish for an extended period of time.
Commodities
Oil prices tumble on fears that energy demand is dropping
Oil prices drifted lower after digesting a surprising build in U.S. crude oil inventories that re-ignited fuel demand anxiety.
Oil prices drifted lower at the fourth trading session of the week, after digesting a surprising build in U.S. crude oil inventories that re-ignited fuel demand anxiety.
What you should know: At the time of drafting this report, Brent crude prices dropped by 0.37% to trade at $55.87 a barrel, and West Texas Intermediate futures plunged by 0.34% to trade at $53.13 a barrel.
- Oil prices gave up some of their previous gains made on hopes of a massive COVID-19 stimulus program under U.S. President Joe Biden, although both oil major benchmarks were trading far above $50/barrel.
- Recent data obtained from the American Petroleum Institute revealed a gain of 2.562 million barrels for the week ending January 15. This was against the 300,000-barrel drop in forecasts prepared earlier by some energy experts.
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Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, gave valid insights on the effect COVID-19 and other macros have on oil prices.
“Oil prices look a tad vulnerable to potential profit-taking after US crude stockpile bearishly rose 2.56 million against consensus draw. Simultaneously, the near-term China crude demand forecast looks high and susceptible to revision lower as lockdown spread in the country ahead of the Lunar New Year.
“While oil traders see through longer lockdowns on the premise that vaccinations will quickly lead us out of the pandemic, COVID mobility clampdowns still hurt the very near-term view.
READ: Gold prices stay firm, investors await Janet Yellen’s speech
“And since calls for a commodity supercycle have been many after the November vaccine turnaround, open interest in Brent and WTI has increased hugely, suggesting that the market remains very susceptible to any potential bearish headlines big or small, from a positioning perspective alone.”
What to expect: OPEC production at the moment remains well below the level required to meet anticipated demand. It should continue to drive a reduction in oil inventories as the global economy gradually recovers.
Commodities
Gold’s appeal up thanks to a weaker U.S dollar
More COVID-19 relief programs pushed the yellow metal’s appeal up as an inflation hedge.
Gold was up at Wednesday’s trading session, thanks to a weaker dollar coupled with statements from Janet Yellen, the incoming Secretary for the U.S Treasury, calling for more COVID-19 relief programs; these helped to push the yellow metal’s appeal up as an inflation hedge.
What you should know: At press time, Gold futures were up 0.51% at $1,849.60/ounce.
- The Secretary of the Treasury nominee made key statements during her Senate confirmation hearing held yesterday, where she discussed the economic gains of a large stimulus package that would far outweigh the risk of a higher debt burden.
- The greenback dropped for the third consecutive trading session after Janet Yellen said in her hearing that tax cuts enacted in 2017 for large companies should be reversed.
READ: Six largest tech stocks by market value lose more than $1 trillion in 3 days
Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, spoke on the odds that the precious metal currently has amid a relatively strong greenback.
“Maximum stimulus overdrive, favorable to bullion turnaround in taper talk and slightly weaker dollar paint an encouraging backdrop for gold prices provided real rates oblige.
“Gold has been facing headwinds from a strong US dollar and higher real rates so far this year. The market is trying to hold the yellow metal above crucial support levels, which is encouraging,” Innes stated.
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What to expect: However so far, gold has struggled to recover convincingly past the $1850 psychological level, and the 50dma around $1960 remains the ultimate target Q1 for gold bulls.
