Oil prices dipped on Monday afternoon, in what is regarded as one of the worst trading days for the commodity since sometime in May 2020 when WTI slipped into negative territory.
WTI was trading down 5.22% by around 2 p.m. on Monday, $3.24 per barrel down for the day at $58.21 before hitting $58.95 late on Monday night. The Brent benchmark was trading down 4.81% on the day, or $3.12 down per barrel at $61.79 and later ended at $62.38 on Monday night.
The volatility of oil prices can be attributed to fears over oil demand, as the UK announced earlier in the day that the ban on international travel would likely go on beyond May 17 if the infection rate of the coronavirus disease continued to rise globally.
Also heavily impacting on oil prices is a spike in Covid-19 cases in India, a major importer. On Monday, India reported the highest number of new daily Covid-19 cases since the pandemic began, triggering a lockdown in its largest city, Mumbai. This could threaten crude oil demand.
Another area of concern is that there could possibly be an increase in crude oil supply by Iran if its negotiation with the US in their upcoming meeting later this week turns out successful. It should be noted that Iran has been hit by US sanctions over the nuclear deal.
In case you missed it
- It can be recalled that OPEC+, in a surprising move, decided to ease production cuts as it plans to ramp up oil production from May. While the general consensus is that the market will absorb the additional barrels, most analysts had anticipated a rolling over of the current level of production cuts.
- Despite this market shock last week, prices did not immediately react. However, it is yet to be seen whether it was a wise move in the face of fragile demand recovery.
Oil prices stay on course as Saudi’s Energy Minister reassures traders
British based oil contract traded at about $63 a barrel while the WTI futures were trading slightly below the $60 price level.
Crude oil prices remained relatively firm at the early hours of Friday’s trading session as oil traders digested Saudi Arabia’s defense of OPEC+ plans in raising output thereby capping gains.
At press time, the British based oil contract traded at about $63 a barrel while the West Texas Intermediate futures were trading slightly below the $60 price level.
Saudi energy minister Prince Abdulaziz bin Salman recently revealed that there were no pressing concerns of demand/supply dynamics changing gear amid the gradual boost in outputs in an interview aired on Thursday, adding that OPEC+ had all ammunition put in place to change course if necessary. OPEC+ will continue to meet monthly on reviewing the energy market supply dynamics.
Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics spoke on the prevailing market sentiment amid macros pointing to more oil supplies hitting the sensitive energy market and an upsurge in COVID-19 caseloads.
“Positioning is much cleaner, although the market remains directionally long oil. However, the sudden calm and drop in volatility have attracted passive investors back to the fray as the market structure around prompt spreads start to tighten and the dollar begins to roll over.
“Still, the conflicting signals around OPEC+ supply coming back to market amid spiking coronavirus case numbers in India plus parts of Canada as well as Tokyo backtracking into the lockdown Abyss, together with reports linking the UK’s Covid-19 vaccine workhorse to the higher frequency of blood clots, continues to hold the bulls at bay.”
What to expect: The most recent OPEC+ agreement on releasing barrels into such present demand was not out of place – suggesting the futuristic price of oil might range between the $60 -$70 price levels with production normalization vs current high excess production capacity taken into consideration.
Gold retreats from 2-week high amid a stronger U.S economy
Gold futures edged lower by 0.20% to trade at $1,739.45 an ounce amid falling U.S. Treasury Yields.
Gold’s price retreated from its two-week high as positive data from the world’s biggest economy bolstered hopes for a quick economic recovery from COVID-19, despite the recent lockdowns seen in Western Europe.
At press time, Gold futures edged lower by 0.20% to trade at $1,739.45 an ounce amid falling U.S. Treasury Yields, while the greenback slipped to a two-week low.
Just recently, the job openings report in the U.S for February posted a two-year high of 7.367 million; hiring also recorded its biggest surge in 9 months.
However, Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, spoke on the prevailing market conditions giving the precious metal the needed support in the mid-term amid the falling value in the U.S dollar.
“Gold jumps as the US dollar and yields fall. And with the dollar not responding to “US exceptionalism,” it still leaves room for further price climbs.
Gold prices firmed in volatile Asian and European trading as the Easter holidays ended and full trading got back underway. Gold received support from the FX markets as EUR/USD retained Monday’s gains, putting gold on a firm footing.
And as we all know, gold in a dollar weaker environment tends to remain tethered at the hip to the Euro.”
Metal pundits argue that the current weakening of the greenback and a recent easing in yields will effectively provide the accelerant to a rally in gold and silver in the midterm.
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