Oil gain ground, gold eyes Fed

Oil rises with stockpile data in focus

Oil prices are extending gains, with Brent rising for a fifth straight session, closing in on USD75, its highest level since 2019. Weekly gains are once again notching up as oil only seems to trade in one direction at the moment. Sentiment surrounding the black gold is already upbeat as economies re-open after the pandemic lockdown. Demand is outstripping supply, which is boosting the price of oil. Falling inventory data reflects recovering demand, providing the markets with supportive evidence to drive the next leg higher.

Oil inventories declined by 8.5 million barrels in the week ending 11 June, according to API data. Attention will now turn to EIA numbers due later today. Crude stockpiles have declined for four consecutive weeks.

WTI is looking comfortable above USD70. With oil demand expected to pick up in the second half of the year, prices could easily tick higher. The demand side of the equation looks strong. How high prices go depends largely on the next steps taken by OPEC+, which are largely unknown so far. That said, the case is certainly there for OPEC to continue removing supply constraints across the latter part of the year.

Gold’s direction sits in the hands of the Fed 

Gold is clinging on to small gain after three consecutive days of declines. The precious metal came under pressure owing to a stronger US dollar on Tuesday, finding support at USD1,850. Gold has clawed back some losses, helped today by the softer tone surrounding the greenback. However, the next directional move sits in the hands of the Fed. Should the Fed give any hint that it could start to rein in its ultra-loose monetary policy, the US dollar could enjoy a boost, crippling demand for US dollar-denominated gold.

The yellow metal fell through its multi-month ascending trendline at the beginning of the week. However, it found support on the 50 EMA. Beyond here, the 200 EMA and the descending trendline dating back to August create an area of strong support, which will create a significant shift in the technical outlook if gold breaks through.

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