Oil at fresh two-year highs as OPEC fails to agree
Oil prices surged on Thursday after OPEC+ failed to agree to increase oil output. Both oil benchmarks surged more than 2% and are holding onto the lion’s share of those gains in trading so far today. Across the week, oil prices are set to book gains of 1.5% in the sixth consecutive week of hikes.
The United Arab Emirates, a key member in the OPEC+ alliance, threw a last-minute spanner in the works, blocking a deal to raise output. The meeting was postponed amid bitter infighting, casting doubt on whether a deal to boost production can be agreed upon and the price of oil contained. If no deal is agreed, the oil cartel could fall back onto existing terms, which see output unchanged until April 2022, squeezing an already very tight market.
Oil prices have only seemed to go in one direction over the past six weeks, jumping more than 10% in June alone. As economies reopen, surging demand is being met with limited supply given the OPEC output cuts. Failure to boost output could see oil prices head towards USD100 per barrel sooner rather than later.
Gold holding mild gains for now
After hitting a two-month low earlier in the week, gold is rebounding, extending mild gains for a third straight session. Nervousness surrounding the rapid spread of the Delta Covid variant and its potential economic impact has offered support to the safe-haven precious metal.
However, gold is holding onto this week’s gains leading into the US non-farm payroll report, which could shed more light on the Fed’s next moves and the timeline of any shift in policy.
A strong reading could increase bets of the Fed acting sooner to tighten policy, dragging on non-yielding gold. For now, the price of gold is likely to tread water with few brave enough to place large bets ahead of Friday’s main event.
