Energy traders eye OPEC+ supply cuts, gold rallies as yields tank

Oil

Energy traders are widely awaiting the next OPEC+ meeting that will likely make sure the oil market remains tight. ​ Oil is back above the $80 level on seasonal stockpiling, some resilience in the economy that is delaying recession risks, and mostly on expectations OPEC+ will cut production between 500k and 1 million bpd. ​

Crude prices extended gains after the EIA report showed crude and gasoline stockpiles both declined. ​ Crude exports rose for a third consecutive week and US production dipped as maintenance occurred with some offshore pipelines in the Gulf of Mexico. ​

EU Commission President Von der Leyen proposed an 8th package of sanctions against Russia that confirms the laying of a legal basis for a Russia oil price cap. This oil price cap still has yet to get support from India, China, or Turkey, so that is why crude did not rally much following the formal announcement.

It looks like oil has massive support around the mid-$70s and given the current macro/geopolitical backdrop has a chance to make a run towards the mid-$90s. ​ ​ ​ ​

Gold

Gold prices welcomed the BOE’s dramatic intervention that avoided an imminent gilts crash and sent global bond yields sharply lower. This was somewhat expected and serves as a reminder that gold will do just fine once the global bond market selloff is truly over. ​

Gold was getting dangerously close to the $1600 level as the dollar was surging to fresh records, but that trade might have hit an exhaustion point. ​ Global recession fears will likely remain the theme for the rest of the year and that should limit how far global bond yields end up going. Gold’s two-year low might be the bottom; if not it should be very close to it. ​ ​ ​ ​ ​ ​

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