Energy & Precious Metals – Weekly Analysis & Calendar


© Reuters.

By Barani Krishnan – Crude prices fell after skyrocketing the previous week, while gold failed the $ 1,800 test again, bracing for fundamental moves next week when the oil producer cartel OPEC + and the Federal Reserve meet for their monthly meetings. Idiosyncrasy may also be the order for all markets next week when the White House begins releasing details of President Joe Biden‘s alleged tax hike on the wealthiest Americans. Biden reportedly wants to increase 43.4% for the richest people, bringing combined state and federal rates in places like New York and California to well above 50%, the highest in US history. The president aims for 0.3% of the American population to fund about $ 1 trillion in child care, universal preschool education, and paid worker leave. But he will have to overcome a significant political hurdle in Congress to do so, Bloomberg reports. While we wait for word from the administration on this, let’s focus on what’s likely to happen in the energy and precious metals space, starting with the OPEC + meeting on Wednesday. If we believed in the producers’ cartel, nothing material would come out of the April 28 meeting, which consists of ratifying the production quotas previously agreed for May to July. The 23-member OPEC +, comprising the original 13 members of OPEC (i.e. the Saudi Arabia-led Organization of the Petroleum Exporting Countries) and 10 other Russian-led oil-producing nations, decided on April 1 to increase production by 350,000 bpd in May and June and by more than 400,000 bpd in July. Additionally, Saudi Arabia will also ease its unilateral 1 million bpd cut over the same period, starting with increases of 250,000 bpd in May and June. Russian Deputy Prime Minister Alexander Novak, commenting before the meeting, said the idea was to “review the market situation one more time” before the start of the May-July quotas. Novak said: “We made our plans a month ago, so if nothing out of the ordinary happens in the meantime, next week’s meeting will confirm those plans or modify them.” The problem is that a lot has happened, especially in India and Japan, in terms of Covid. Also in Vienna, Iran has moved quickly with the United States in talks for a nuclear deal that would free it from Trump-era sanctions to export its oil again. On the Covid front, underestimating the human cost of the outbreak, which accounts for nearly half of all new global cases of the pandemic. With hospitals unbearably full, oxygen supplies running low, and people in line dying before they can see doctors, India’s second wave of coronavirus is turning into a crisis that cannot help. To visualize what is happening, think of “Italy” in 2020 and add another 1.4 billion people to the mix. In Japan, the government has declared support for Tokyo, Osaka and two other prefectures in a bid to halt an increase in coronavirus cases, just three months before the Tokyo Olympics. Meanwhile, Iran has done something to world powers, although more work is needed, a senior European Union official said. With the meetings set to resume in the Austrian capital next week, Iranian Deputy Foreign Minister Abbas Araqchi also “assessed the current trend of future talks, despite existing difficulties and challenges,” the media reported. state. To underscore the importance of these developments, oil prices fell as much as 3% between Tuesday and Wednesday due to concerns about the Covid situation in India and Japan, and talks that Iran could win a nuclear deal in May. That would allow it to put an additional two million barrels per day on the market. US crude and UK Brent crude futures rose in the last two days of the week, but not enough to make up for their dismal start. “Oil earnings are likely to remain limited until India and Japan, as the third and fourth largest oil consumers, turn around in their battle against the virus,” said Sophie Griffiths, UK and EMEA research director for the online broker OANDA. Novak, speaking before the OPEC + meeting, described the oil market as “balanced” and said that if a supply shortfall occurred, the cartel could always pump more. Under the circumstances, it would look more like a surplus in the coming months, and the cartel would be pumping less. For context, oil prices fell to a negative historical price of minus $ 40 per barrel in April 2020 at the height of Covid-led demand destruction. Production cuts by OPEC + since then helped the market make a notable recovery, with the rally accelerating after advances in vaccines in November. On the gold front, the yellow metal ended the week uneventful despite approaching precariously the $ 1,800 level that would have been key to recovering last year’s highs. It was a crushing disappointment for longs that had a more significant advance in gold after a nine-week high of $ 1,796.15 on Friday. The last time Comex gold traded above $ 1,800 was on February 25. With the weight of markets pending, analysts said gold prices were likely to drift until the central bank’s monthly event was on the day. “Moderation in demand for safe havens has limited the rally in gold,” said Ed Moya, an analyst at OANDA New York. “Gold prices are likely to consolidate before the Fed between $ 1,760 and $ 1,800.” Fed Chairman Jay Powell, in a conversation with Reuters on Tuesday, said the central bank will limit any overshoot of its inflation target. The US economy will temporarily see “slightly higher” inflation this year as the recovery strengthens and supply constraints lift prices in some sectors, but the Fed is committed to keeping inflation anchored at 2% over the long term. term, Powell said. Powell also sought to allay concerns that the Fed’s bond purchases would trigger an unprecedented amount of deficit spending and borrowing by Congress. Congress approved an unprecedented $ 6 trillion aid between the Trump and Biden administrations to help Americans weather COVID-19. The central bank bond purchase, Powell said, was aimed at keeping financial conditions easy and markets running, and “is not related to the size of fiscal deficits,” adding that the Fed does not buy bonds directly from the government. Therefore, policymakers are expected to maintain a super easy monetary policy at their meeting next week, even as the economy strengthens and the increase in vaccines makes the return to a more normal life in the United States. probably in 2021. a final trade of $ 1,776.75 before the weekend. Comex gold closed Friday’s session down $ 4.20, or 0.2%, at $ 1,777.80 an ounce. During the week, it was down 0.1%. The price of gold closed at $ 1,777.11, down $ 6.88 or 0.4%. On the week, spot gold was up 0.1%. Movements in spot gold are an integral part of fund managers, who sometimes rely on it more than futures for direction. Oil Price Summary The New York-listed benchmark for US crude made a final trade of $ 62.05 before the weekend. It closed Friday’s trade at $ 62.14 a barrel, up 71 cents, or 1.2%, on the day. It fell 1.6% during the week. The London price, the global benchmark for crude, made a final trade of $ 65.99 before the weekend. Friday’s trade closed at $ 66.11, an increase of 71 cents or 1.1%. In the week, it fell 1%. Energy Markets Calendar Ahead Monday April 26 Stock estimates from Cushing Private Weekly report for Tuesday April 27 on oil stocks. Wednesday April 28 EIA Weekly Report on EIA Weekly Report EIA Weekly Report and Press Conference Thursday April 29 EIA Weekly Report on Friday April 30 Baker Hughes Weekly Disclaimer Survey – Barani Krishnan uses a variety of points of view outside his own to bring diversity to his analysis of any market. For the sake of neutrality, he sometimes presents conflicting views and market variables. He does not occupy a position in the commodities and securities he writes about.