Waiting OPEC+ decision, Exxon investing in new wells, gold rallies above USD 1800

Oil/Exxon

Crude prices edged lower ahead of the OPEC+ meeting on output and after Exxon’s quarterly update showed the oil giant was ready to significantly increase its investment in new wells.  Fears of an OPEC+ surprise has many energy traders locked in profits. OPEC+ is expected to stick to the script and deliver a 400,000 bpd increase next month and when you factor in that many members are struggling to hit their quotas, oil seems poised to head higher.  Fears of disruption to supplies will remain elevated given the winter blast hitting the north and the geopolitical risks abroad.

WTI crude seems poised to resume its bullish trend as long as the Saudis don’t pull a surprise at the OPEC+ meeting and make a push for a larger increase over output. The Saudis are seeing US drillers are beginning to invest in new wells and that could trigger some market share fears.

Exxon delivered impressive results as revenue surged over 80% year over year and profit posted the best gain since 2014.  The oil giant is going to have a strong year as they continue to focus on cost-cutting and buying back shares, while benefiting from a new lower breakeven oil price that fell to $41 a barrel.  Exxon is boosting its spending on new wells by as much as 45%.  The company narrowed its capital expenditure guidance for the year, which still supports a significant investment in new wells.

Gold

Gold is bouncing back as expectations for aggressive global central bank tightening eased after the RBA showed they are in no rush to raise rates and as some traders doubt the Fed will kickoff tightening with a half-point increase.  The Fed’s Harker signaled that he currently supports the idea of four 25 basis point increases this year and is not convinced they should start with a 50 bps increase in March.

Gold also got a boost on fears that nonfarm payrolls would have a big miss after White House press secretary Psaki said around 9 million people called out sick in early January.

Gold fell to session lows after the ISM and JOLTS data sparked inflationary fears, sending the 10-year Treasury yield back above 1.80%.  Gold is hovering around USD 1800 but if selling pressure returns, it could get ugly quick as momentum sellers are watching.

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