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Late Dollar Headwind Eats Into Prior Crude Gains

COMMODITIES
  • WTI front month futures are ending the session with a only mild gains having given up some earlier strength in a move that started before but had additional impetus from Treasury yields and the dollar surging on first a poor 30Y auction and then Fed Chair Powell’s remarks.
  • Crude has regained ground after steep losses yesterday amid an improved risk sentiment and slight pull back from the downside pressure the bearish demand outlook is having on prices.
  • The WTI prompt month time-spread has flattened and is oscillating between a shallow contango and shallow backwardation. Weak prompt demand, record US output and expectations of building Cushing stocks are weighing on the prompt and pushing the market into contango.
  • Saudi Energy Minister Prince Abdulaziz bin Salman says the recent oil decline is due to speculators and that oil demand is healthy according to Bloomberg.
  • WTI is +0.2% at $75.45, close to support at $74.91 (Nov 8 low).
  • Brent is +0.3% at $79.77, off support at $79.20 (Nov 8 low).
  • Gold is +0.5% at $1959.7 giving back only a small part of earlier gains considering the magnitude of the USD upswing. It remains a long way from the bull trigger at $2009.4 (Oct 27 high) after recent heavy declines.
  • JPMorgan earlier today: "From a peak of around $175/oz at the end of October, gold's geopolitical risk premium on top of what can be explained by underlying moves in the USD and US 10-year real yields has more than halved and sits around $65/oz."
  • "We think current US 10-year real yield levels imply a 'fair' gold price level of around ~$1,880/oz, pretty much aligned with what monthly changes in the DXY and real yields also imply." [...] "In the very near-term we expect gold prices could remain under pressure as some of the remaining risk premium continues to erode. Though, we largely expect prices to once again restabilize in the low $1,900s in the coming months."
Energy BulletsCommoditiesJPMorgan Market News
Energy BulletsCommoditiesJPMorgan Market News

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