Oil prices again held firm and added incremental gains this morning, taking the monthly advance to around 2.4% for WTI and pushing towards the upper resistance level of 2017’s $4 trading range. A little before markets were due to open in London today, Brent crude was changing hands for $56.03, up 0.2%. The price of a barrel of WTI was flat at $54.06. Despite impressive OPEC compliance with commitments on output cuts and increasing U.S. shale production, it is WTI which has recorded gains throughout February, presumably in expectation of subsequent rises in Brent as OPEC supply cuts bite.
Market participants will be watching for the American Petroleum Institute’s weekly report on U.S. inventory levels today, before the more influential U.S. Energy Information Administration (EIA) report tomorrow. After last week’s inventories data showed increases that were multiples below forecasts, traders will be keen to see whether that trend continues into this week or whether it was a simple rebalancing after the previous week had seen inventories growing by more than expected. While seasonality dictates that inventories historically grow at this time of year, that period is coming to a conclusion and markets will soon start to expect to see clear evidence of OPEC and partners’ 1.8 million barrels a day supply cuts having an impact and inventories starting to fall.
An exclusive Reuters report today claims unnamed OPEC and oil industry sources have told the newswire that Saudi Arabia, OPEC’s de facto leader, is determined to see oil prices rise to $60 a barrel this year. While the OPEC party line has always been that it does not target specific price levels but cuts are first and foremost aimed at rebalancing international inventory levels and balancing the market, the report says that Saudi Arabia does see $60 as the optimal oil price level. The world’s biggest crude exporter, the article claims, believes that $60 a barrel is the price that would be sufficient to encourage investment in new oil fields without overly stimulating a ramp up in U.S. shale production.
A non-Gulf source quoted in the report says that the $60 level is important to Saudi Arabia for both investment and its intended stock market float, tipped to be the world’s biggest, of Saudi Aramco, the country’s state-owned oil company.
Gold prices dipped yesterday, having started the week close to 3.5 month highs. After touching $1,263.80 oz. early in yesterday’s session, prices softened. This morning spot gold managed to reclaim 0.1% to $1253.93 oz., though gold futures dropped a further 0.3% to $1254.4 oz. Today’s address to Congress by Donald Trump is expected to contain clarification on his administration’s intended fiscal stimulus policy of increased defence and infrastructure spending and corporate tax cuts. Details of a bullish fiscal stimulus package would be expected to hurt gold and boost risk-on and income earning assets such as equities.