Oil jumps as OPEC sees a well-supported market
Oil was trading at a seven-year high and the latest OPEC report offered little hope of that trend reversing course, with the group confident that demand growth will remain strong this year. OPEC sees demand hitting 100m barrels per day in Q3, surpassing pre-pandemic levels this year. This comes despite headwinds created by Omicron and rising interest rates which they don’t believe will have an overly detrimental impact.
They did revise up US shale output, which given OPEC’s failure to hit production targets will be welcome. Producers surely won’t be able to resist these prices, but to what extent they can make a difference remains to be seen. For now, prices are continuing to rise with only very minor corrections along the way.
Gold could slip if markets continue to price in more rate hikes
Gold was marginally lower on Tuesday. The yellow metal has been well supported in recent weeks despite bond yields rising to reflect an expectation of increasingly aggressive tightening from central banks.
That’s not something that’s typically associated with higher gold prices which may suggest higher inflation expectations and more risk aversion. But with talk now starting around more than four Fed hikes or a kick start in March, we could see some of those inflation hedges—if that’s what they are—unwound.