Oil eyes OPEC, gold attempts rebound

Oil looks to OPEC

After an almost 3% sell-off in the previous session, the oil bears remain firmly in control as attention turns squarely to the OPEC+ meeting on Thursday. Expectations are growing that the group will ease current output cuts and increase supply into the market.

The big question here is by how much? Currently, the group is holding back on around 7% of global supply (7m bpd). Given the strong rise in prices over the past five months, speculation is growing that the world’s top producers could agree to release 1.5 million bpd back into the market.

Relations between member states will also be under the spotlight. As the oil markets start to normalise and OPEC+ relaxes its output restrictions, frictions between members states could begin to dominate again. The January OPEC+ meeting overran as the group struggled to reach a consensus. Investors will be looking for further signs of disaccord which could add pressure to oil prices.

API inventory data due later today could provide fresh cues ahead of Thursday.

Gold oversold

A strong USD is keeping the pressure on gold; however, the softer risk and retreating US bond yields are helping to limit losses at least in the near term. Gold has bounced off multi-month lows of USD1707 overnight and is attempting to turn positive on the day. Buying the dips below USD1800 has given way to sellers jumping in on moves to the upside. It’s worth noting, though, that gold is looking oversold on the daily chart so a period of consolidation could well be on the cards. Support can be seen at USD1707, today’s low ahead of horizontal support at USD1684 from April/May. On the upside, bulls would be looking to push beyond resistance at USD1726 for further gains to USD1740.

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