A small OPEC+ cut could make oil vulnerable; Gold Rises – Investing.com India

A negligible production cut by OPEC+ could leave oil bulls defenseless again this week as the US summer peak drive comes to an end and the dollar continues to hit 20-year highs. Description: Crude Oil Daily El will likely look for support at the $1,730/oz level as the precious metal is on a technical rally from $1,600 last week. He rose as much as 3% as a knee jerk reaction to OPEC+’s Monday announcement that it will cut output by 100,000 barrels a day in October. The move came on the back of weaker than usual trading volume due to the Labor Day holiday, which meant that market gains were fueled by momentum rather than clarity of mind. Barely 24 hours later, crude prices were retreating from highs as traders realized that OPEC+ was merely planning a pullback on paper from the same 100,000 barrels a day output increase it had announced a month earlier. OPEC+ is made up of the 13 original members of the Organization of Petroleum Exporting Countries led by Saudi Arabia and 10 other oil-producing allies led by Russia. However, on Tuesday in Asia, analysts called the output cut “symbolic” as it became clear it had been forced by OPEC+ members, who were clinging to Saudi Arabia’s suggestion two weeks ago that A taper was probably needed to restore the market, which had lost 32% since hitting a high in March. The New York-listed US benchmark oil was trading at $89.09 a barrel at 10:05 AM ET compared to Monday’s high of $90.37. WTI fell 6.7% last week. The world benchmark oil traded in London stands at $95.55, down from the previous day’s high of $96.99. Brent lost 6.4% last week. Warren Patterson (NASDAQ:), head of commodity strategy at ING (AS:), says of OPEC+’s proposed production cut: “Although the headline figure is a cut of 100,000 barrels a day, in reality, the cut actual will be much lower… Most growers have not been able to meet their targets and are producing significantly less than they should.” To balance, or rather “support,” OPEC+’s action, Noah Barrett, energy and utilities research analyst at Janus Henderson Investors, said in another note: The cut “indicates that OPEC+ is looking at demand very closely.” close and is trying to manage supply to maintain a bottom in oil prices. The reality is that, with the end of the period of maximum driving in the United States, the consumption figures for crude oil, as well as for fuel products, could stagnate despite the fact that demand is now at pre-pandemic highs. Everything also indicates that the incipient recession in the United States and the possibility of a deeper slowdown in Europe, together with the confinement of 70 Chinese cities that affects more than 300 million people, will weigh on demand for oil. Oil traders are also watching for any remote possibility that the Iran nuclear deal could be revived to unblock US sanctions that could allow the legitimate export of up to a million barrels of oil from the Islamic Republic to the world market. The White House made it clear on Friday that no agreement had yet been reached to revive the nuclear deal. The head of EU diplomacy, Josep Borrell, also said on Monday that efforts to reach an agreement on this issue were “in danger” after the positions of the United States and Iran diverged in recent days. While the latest developments on Iran could be supportive for oil bulls, there is also the relatively robust August US employment report that could embolden the Federal Reserve to carry out its third consecutive rate hike. 75 basis points on September 21. This caused the currency to hit a 20-year high on Monday at 110.26, making the greenback a safer haven than gold. Added to this is the agreement reached on Friday by the Economy Ministers of the Group of Seven to limit the price of oil sold by Russia. Although Moscow has vowed to retaliate against countries that enforce this decision, it is also likely to cut back on selling its oil to other OPEC+ producers whenever possible to make up for lost revenue. Russia’s aggressive discounting of oil in the physical market will ultimately matter in the futures market, as well as weighing down the price of OPEC+ oils, including Saudi crude. Gold prices have rallied sharply from hitting six-week lows on Tuesday, as Europe’s worsening energy crisis boosted safe-haven demand, while he extended gains on expectations of more stimulus from the US. from China. Demand for conventional safe havens surged after Russia shut down a major gas pipeline to Europe, putting the continent at risk of a major energy crisis. But the fact that the dollar hit a 20-year high could also weigh on gold. The benchmark New York COMEX gold futures contract for December is at $1,726 per ounce, up $3.40, or 0.2%. December gold fell 1.6% last week, adding to consecutive falls of 0.7% and 2.9% in the last two weeks. Gold futures have fallen for six straight months since their last positive close of $1,954 in January, down almost 12% in that period. Bullion’s spot price, which some traders follow more closely than futures, rose $4.86, or 0.3%, to $1,715.48. Disclaimer: Barani Krishnan uses a number of viewpoints other than his own to bring diversity to his analysis of any market. In the interest of neutrality, he presents contrary opinions and market variables. He does not own or hold a position in the commodities or securities he writes about.