What’s next? – OIL, GOLD 21.06.17

OIL

Crude prices moved lower in Asian trade on Wednesday, with sudden changes in the Saudi royal family lifting uncertainty over the kingdom’s future, while traders looked ahead of fresh inventory data from the US Energy Information Administration later in the day.

The US benchmark West Texas Intermediate oil futures traded at $43.45 a barrel, down 0.18 percent from its prior close. Meanwhile, the London-based Brent crude oil futures fell 0.17 percent to trade at $45.94 a barrel as of 07:27 GMT.

Saudi Crown Prince Mohammed bin Nayef has been replaced by Deputy Crown Prince Mohammed bin Salman, putting him in the first line to become the king.

The move was announced in an unexpected statement from the crown and analysts said it could be related to the recent diplomatic tension with Qatar and Aramco IPO.

On Tuesday, crude prices settled in red territory following the release of the weekly report from the American Petroleum Institute showed a larger-than-expected drop in crude inventories, although it anticipated a build in gasoline supplies.

Sentiment on the oil market remains under pressure as there are rising concerns that OPEC-led output cuts would not be able to counteract increasing US shale production.

Last month, OPEC and non-OPEC producers extended their output cut agreement until March 2018 for a volume of 1.8 million barrels per day.

The Energy Information Administration will release its weekly stockpiles report as of 14:30 GMT, with expectations for a 2.1 million barrel decline.

GOLD

Gold edged up in Asian hours on Wednesday, with market players trying to figure whether a third Federal Reserve interest rate hike is likely to take place later this year considering the recent economic data from the United States.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery were trading up by 0.25 percent at $1246.50 a troy ounce as of 07:30 GMT.

On Tuesday, gold prices settled lower as the American currency continued to recover on the back of rising expectations for a rate move in September or December.

According to Fed funds tracked by CME Group’s FedWatch program, chances for a September move around 13 percent, while the probability for December above 43 percent.

The data front looks really thin this week and investors are mainly focused on a series of speeches from FOMC representatives, looking for hints on the regulator’s future plans.

Boston Fed President Eric Rosengren said on Tuesday that low interest rates represent financial risks that central bank and financial actors should take into account. A day earlier, New York Fed President Bill Dudley warned about keeping rates low for too long could have serious consequences for the economy.

Chicago Fed President Charles Evans took a moderate stance, saying it could be wise if the US central bank would wait until the end of the year to decide on a fresh rate hike.

Higher rate environments are seen as a negative factor for gold prices, which are priced in US dollars and its demand comes under pressure amid rising interest for risky assets.

Fort Financial Services