Oil higher as OPEC meets, gold rebounds

WTI rises on OPEC expectations to hold output cuts

Oil prices are marching higher, snapping a two-day losing streak ahead of today’s OPEC meeting. Concerns over the demand outlook have dragged on the price of oil as Covid cases rise, France goes into its third national lockdown and OPEC downwardly-revised its growth forecasts for this year.

Today those same factors are building on the case for OPEC to keep production curbs in place for another month, offering support to the price of oil.

Looking back at last month’s meeting, the OPEC+ group were cautious. Since then, the Covid picture has deteriorated significantly not just in Europe, but also in India and Brazil. Consequently, the outlook for demand has also deteriorated making no significant changes to production the most likely outcome.

The fact that oil prices have rebounded more than 2% today indicates that the oil markets are confident that OPEC will keep production cuts in place. It’s a safe bet to assume that any talk of tapering output cuts will be pushed out to next month.

Gold finds its mojo

After a softer start to the week, gold has found its mojo. The precious metal is building on gains from the previous session and is back trading comfortably over USD1,700.

Joe Biden’s USD2 trillion infrastructure spending plans initially sent inflation expectations higher. Gold, a traditional hedge against inflation, jumped on the back of that wave.

Furthermore, weaker-than-forecast data from China overnight has provided a tailwind for the safe haven. China’s Caixin manufacturing PMI for March disappointed at 50.6, against 51.3 expected. Attention will now turn to the non-farm payroll data tomorrow, which in light of yesterday’s solid ADP report, could surprise to the upside. However, it is worth noting that metal markets are closed tomorrow for Easter, meaning any open position will need to endure a three-day weekend and an NFP result.

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