Risks tilted to the downside for oil
Oil prices are sinking on Thursday after enjoying another positive session yesterday.
Inventory data was positive for prices on the face of it but given the impact of Hurricane Delta, I’m not sure there’s a huge amount to take away from it. And I’m not sure it warrants the continued support we’re still seeing in prices, despite today’s large declines.
This is still an environment that’s very unfavourable for oil prices and with increasing restrictions being imposed across Europe and probably following shortly after across the pond, the demand picture is not looking great.
Perhaps I’m missing something but I struggle to see oil managing to hold on at these levels unless a stimulus package in the US is somehow struck ahead of the election. Even then, the risks remain tilted to the downside medium term, barring another OPEC+ intervention.
Gold content around $1,900
Gold is lingering around $1,900 once again and seems content to hover around this level and wait for the major risk events to pass it by.
The next few weeks could see many of these resolve themselves and could be very positive for risk appetite if they unfold as you’d expect. The challenge for gold and other risk assets is that we live in a very unusual time, one when very little seems to go to plan. And the downside risks are considerable.
