Oil traders are monitoring OPEC+ updates ahead of this week’s meeting, while a strong buck hit sentiment in copper/gold markets.
Key Points
Oil prices saw a modest technical rebound on Tuesday, with WTI last trading in the green by about 80 cents in the mid-$94.00s, but failing to hold back above its 200-Day Moving Average just above $95.00 per barrel. Oil traders are on notice for the release of weekly private US oil inventory figures at 2030GMT ahead of the release of the official US government inventory figures on Wednesday. The data will be scrutinized for insight into the health of US demand as the economy shows signs of slowing.
Oil traders are also monitoring OPEC+ updates ahead of the group’s meeting later this week. Sources told the financial press that OPEC+ has axed its outlook for the size of the expected oil surplus this year by 200,000 barrels per day to 800,000 barrels. An easing of worries about an oil market surplus may encourage some OPEC+ members to push for another output rise in September, despite sources last week indicating that the cartel is considering either no output hike or only a very small one.
Oil prices have been under pressure in the last few weeks amid growing concerns about the demand outlook as the global economy shows signs of slowing. Analysts think a sustained break below WTI’s 200DMA could open the door to a cascade of selling pressure towards the next key area of support in the $85 region.
US natural gas prices also continued their recent pullback from late-July highs. Prices were last down close to 6.5% on Tuesday in the $7.75 area, having been as high as $9.50 just a few days ago.
Strength in the US dollar amid a rise in tensions between the US and China following US House Speaker Nancy Pelosi’s visit to Taiwan on Tuesday, and amid a sharp rise in US bond yields, weighed on industrial metals on Tuesday, including copper. Copper prices slipped back under $3.50 and were eyeing a return to their 21-Day Moving Average in just under $3.40.
Monday’s week global/Chinese manufacturing data and poor earnings from global industrial bellwether Caterpillar likely contributed to an uptick in copper outlook demand concerns. Gold prices, meanwhile, reversed abruptly lower from an earlier test of resistance in the upper $1,780s and were last in the mid-$1,760. The aforementioned strength in the US dollar and US yields resulted in gold traders taking profit after the precious metals recent run higher.
Joel Frank is an economics graduate from the University of Birmingham and has worked as a full-time financial market analyst since 2018. Joel specialises in the coverage of FX, equity, bond, commodity and crypto markets from both a fundamental and technical perspective.