Oil dips on inventories, gold edges upwards

Can oil break USD 90?

Oil prices are a little lower again today after tumbling a day earlier on the back of a surprise surge in inventories. The 4.5 million barrel increase in stocks caught the market off guard, with forecasts pointing to a small decline. New talks in Vienna over the nuclear accord may also be contributing to some of the weakness.

Add into the mix the new OPEC+ deal which aims to increase production by 100,000 barrels per day and the price naturally slipped a little. The deal isn’t huge but given the economic environment and downside growth risks ahead, it’s not surprising that they’ve taken a conservative approach. The key question is how big the shortfall will be going forward.

A break below USD 90 is now a very real possibility which is quite remarkable given how tight the market remains and how little scope there is to relieve that. But recession talk is getting louder and should it become reality, it will likely address some of the imbalance. Just not in the way we’d like.

Gold eyeing another run at USD 1,800?

Gold is pushing higher again this morning as yields ease of this week’s highs and the dollar softens. I’m not sure if this is a case of the Fed’s message not getting through or investors not buying it but the market is still favouring 50 basis points in September and a reversal towards the middle of next year.

If that remains the case, we could see gold prices continue to edge higher and push against USD 1,780-1,800 where it has already run into resistance. More recession talk could also favour gold as it may lower interest rate expectations and trigger safe-haven flows.

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