Showing posts with label Morning Edition.. Show all posts
Showing posts with label Morning Edition.. Show all posts

Feb 26, 2021

Oil Price Report (Morning Edition): Prices Fall on a Rising U.S. Dollar.

Oil prices fall on rising U.S. dollar, expectations for supply gains


An aerial view of a crude oil storage facility is seen on May 5, 2020 in Cushing, Oklahoma.

Oil prices fell on Friday as a collapse in bond prices led to gains in the U.S. dollar and expectations grew that with oil prices back above pre-pandemic levels, more supply is likely to come back to the market.

U.S. West Texas Intermediate (WTI) crude futures dropped $1.32, or 2%, to trade at $62.20 per barrel, giving up all of Thursday's gains.

Brent crude futures for April fell 97 cents, or 1.45%, to $65.91 a barrel, following a 16 cent loss on Thursday. The April contract expires on Friday. The more active May contract fell 32 cents, or 0.5%, to $65.79.

"Bonds are selling off reasonably aggressively and the U.S. dollar has firmed this morning. That's providing a bit of a headwind for crude oil this morning," said Lachlan Shaw, National Australia Bank's head of commodity research.

A stronger greenback makes U.S.-dollar priced oil more expensive for those buying crude in other currencies.

Despite the drop in prices on Friday, both Brent and WTI are on track for gains of about 20% this month, as markets have grappled with supply disruptions in the United States, while optimism has built for demand to improve with vaccine rollouts.

Investors are betting that next week's meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies, together called OPEC+, will result in more supply coming back to the market, given the recent jump in prices and expectations that demand will improve as pandemic lockdowns ease heading into the northern hemisphere summer.

"The stakes at play this time around are particularly large (for OPEC+) insofar as oil prices have more than recovered to pre-pandemic levels, global inventories are continuing to trend down, and vaccine rollouts are accelerating," Shaw said.

"The market's probably right to think at this price level and given what the fundamentals are doing, there'll be more supply coming into the market over time."

U.S. crude prices also face headwinds from the loss of refinery demand after several Gulf Coast facilities were shuttered during the winter storm last week.

There is about 4 million barrels per day of capacity still shut and it may take until March 5 for all of the shut capacity to resume though there is risk of delays, analysts at J.P. Morgan said in a note this week.

"The greater concern to U.S. crude oil market participants should be the recovery of refinery demand," the analysts said.

"As refiners assessed the damage to their facilities, it became clear that the road to recovery would be weeks rather than days."

Gold Price Report (Morning Edition): Gold is Set for a Second Monthly Dip on Friday 26, November 2021.

Gold set for second monthly dip as high U.S. yields erode appeal


A worker tends to gold bars at a precious metals plant.

Gold slipped on Friday and was headed for its second straight monthly decline, as U.S. Treasury yields held near a more than one-year high, eroding bullion's safe haven status.

Spot gold fell 0.3% to $1,765.06 per ounce. U.S. gold futures dropped 0.7% to $1,762.50.

"The main factor weighing on gold is the surge in bond yields, which makes gold less attractive because it doesn't pay any interest," said Commerzbank analyst Carsten Fritsch.

Bullion had dropped 1.9% on Thursday and was down 4.4% for the month so far.

The benchmark U.S. 10-year Treasury yields on Friday were hovering near an over one-year high scaled in the previous session.

While gold often benefits from expectations for more stimulus measures, given its status as an inflation hedge, government debt has turned out to be a more attractive bet for investors of late since bullion does not pay any fixed interest.

"Gold fell out of favour of investors, a clear sign you can see from continued outflows in gold exchange-traded funds (ETFs)," Fritsch said.

Holdings in the world's largest gold-backed ETF, SPDR Gold Trust , fell 0.6% on Thursday to its lowest since May 2020. "Bullion has failed to hold $1,800 and has now broken the support at $1,775, opening space for further declines," ActivTrades chief analyst Carlo Alberto De Casa said in a note.

"A strong greenback could be detrimental for gold as investors are switching back to bonds in the search for yields."

Silver slipped 1.8% to $26.92 an ounce and was poised for its first monthly decline in three, down 0.3% so far.

Palladium shed 0.8% to $2,382.50, while platinum eased 0.8% to $1,206.43.

Both the auto-catalyst metals were set to register their best month since November.

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