The tug-of-war on oil prices between lowered OPEC output and increasing U.S. oil output continues, with the last couple of days seeing modest ground gained to the upside for oil. Prices inched up again this morning, with Brent crude adding 17 cents, or 0.3%, to $56.41 a barrel prior to markets opening in London. WTI gained 21 cents to $53.99 a barrel, a 0.39% increase.
On Wednesday, the U.S. Energy Information Association weekly figures on U.S. oil inventories indicated a 2.8 million barrel rise from the previous week. This indicates plentiful supplies despite the 1.8 million barrels a day output cut by OPEC and partner oil producers such as Russia, in force since the beginning of the month. The boost that oil prices have received since OPEC announced the cuts in early December has meant that production is again profitable for many U.S. producers, who have higher extraction costs than Middle East oil fields. The subsequent increase in oil output is reducing the impact of OPEC’s cuts and capping further oil price gains. The narrative of 2017 so far, expected to continue into Q2, is how successfully OPEC’s supply constraints will be in rebalancing global oil supplies in light of increased output in the U.S.
Oil prices are moving up and down within a narrow band on fluctuating sentiment as to how the balance will play out over the coming months. And sustained direction for prices, up or down, will be reliant upon more solid evidence of depletion of global inventories, or a lack thereof, in the coming couple of months.
With equities markets buoyant this week on new U.S. President Donald Trump signing a handful of executive order on big infrastructure projects, gold prices have had a punishing several days. Early this morning spot gold prices were at $1182.87 oz., as the Asian session drew to a close and Europe was starting to wake up. The fresh 0.5% slide has taken gold prices back to where they were during the second week of January and completes the precious metal’s poorest week since the Trump rally was in full swing in mid-December. Earlier, spot gold had slid as low as $1182.45 intraday before a modest recovery limited losses. U.S. gold futures shed 0.6 percent to settle at $1,183 oz.
Markets in risk-on mood this week on U.S. infrastructure spending sentiment has combined with falling seasonal demand as Chinese, Taiwanese and South Korean markets start a break for the Lunar New Year today. South Korea will be on holiday until Tuesday and China and Taiwan right through until next Friday.