OPEC+ delivers, gold pares this week’s gains

OPEC+ agrees to cut production

OPEC+ agreed to cut their production target by 2 million barrels a day. OPEC+ is keeping the oil market tight with the biggest output cut since 2020. ​ The production cut was driven by uncertainty that surrounds the global economic and oil market outlooks. The OPEC+ target is now 10.5 million bpd, which according to the Saudis is a real cut between 1 to 1.1 million bpd. ​ The next ministerial meeting will be on December 4^th. ​ The plan is now for them to have ministerial meetings every six months and the monthly JMMC meetings will now happen every two months.

The EIA crude oil inventory showed crude, gasoline, and distillate inventories continue to fall. ​ This report was mostly bullish given a headline draw, rebound in gasoline demand, steady production, and steady exports above 4 million barrels a day.

Oil should remain supported here following the OPEC+ decision and the EIA report, but the upside will be capped well in advance of the $100 a barrel level. ​

After the OPEC+ meeting, Russia’s Novak said it could cut output if an oil price cap is put in place. Novak is signaling that Russia is not desperate for revenues and if this cap moves forward, we could see oil prices extend gains. ​ ​

Gold

Gold prices edged lower after the bond market said not so fast with the collapse of global bond rates. ​ A strong private payrolls report reminded investors that there is still strength in the labor market that could allow the Fed to remain aggressive beyond the next two FOMC meetings.

Gold needs to see a sharper slowdown in the US and cooler prices for a bullish breakout to form. Gold seems poised to consolidate between $1680 and $1740 until we get both the NFP report and the latest inflation readings.

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