Oil continues higher in the aftermath of the surprise OPEC+ output cut
Oil prices are higher again on Tuesday, adding to their substantial gains on Monday following the shock production cut from OPEC+. The decision to reduce output despite no prior warning – quite the opposite in fact – and without a clear view of the demand outlook in light of recent events highlights just how driven by price and speculation the group is, despite its previous insistence otherwise.
There may have been other factors at play as well, of course, and the two million barrel cut late last year didn’t lead to the price surge and market imbalance that many expected, but that doesn’t explain why the group arguably misled markets. Perhaps the war on short-sellers is real and the alliance is determined to discourage it in the future.
For now, crude is trading back around the highs from early December to the mini-bank crisis sell-off, and it doesn’t look like giving up those gains too easily. A move above the $81-83 region in WTI – $86-88 in Brent – could be very bullish, potentially bringing late summer highs into view.
Gold may still have sight set on record highs
Gold is trading marginally lower on the day but remains very close to its recent highs, a sign that traders are not budging from their view that US interest rates are at or near their peak and expect them to fall this year. The yellow metal continues to trade a little shy of $2,000, a major psychological barrier that has held firm on a number of occasions in recent weeks.
A move above this would bring record highs around $2,070 into sharp focus, but that may depend on future interest rate expectations being pared back further and some more risk aversion in the markets.