What’s next? – GOLD, OIL 26.02.18

GOLD

Gold traded in green territory on Monday, recovering from its worst week in more than two months as the American currency eased against major rivals.

The US dollar index, which measures the greenback against six major currencies, was trading 0.24 percent lower at 89.60 by the time of this writing.

The dollar-denominated metal is sensitive to changes in the US currency. A stronger greenback makes the metal more expensive, less attractive for holders of foreign currencies.

Market players are currently focused on a speech by Federal Reserve Chair Jerome Powell before Congress, which is scheduled on Tuesday as of 15:00 GMT.

Investors are trying to get a closer look at the future plans of the US regulator concerning interest rates. At the time, the benchmark rate stands in a range between 1.25 and 1.50 percent.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.88 percent at $1.342.00 a troy ounce as of 06:15 GMT.

Last week, the yellow metal ended 1.4 percent lower as the dollar was widely supported by minutes of the latest Federal Open Market Committee monetary policy meeting.

According to Fed funds tracked by CME Group’s FedWatch program, market participants are currently weighing an 85 percent probability of a 25 basis-point rate hike by March.

Ahead in the day, FOMC member Bullard and Quarles are due to speak at 13:00 GMT and 20:15 GMT respectively. On the data front, new home sales for Jan are up at 15:00 GMT.

OIL

Oil benchmarks were up in early trading hours on Monday, as a fresh report from Rystad Energy forecasted a 20 percent drop in output in East and Southeast Asia between 2017 and 2025.

The US West Texas Intermediate crude contracts were up 0.46 percent to $63.84 per barrel as of 06:30 GMT. Meanwhile, Brent futures rose 0.28 percent to $67.50 a barrel.

According to the document, total oil production in East and Southeast Asia is expected to fall from 13.1 million barrels of oil equivalent (BOE) per day to 10.4 million BOE/D by 2025.

The lack of new oil discoveries in the region, along with the maturity of the oil fields already in place seem to be the causes of this trend. The limited number of sources is a key factor now.

Despite a weaker production seen, demand for crude and refined products in East and Southeast Asia continues to build, with China leading among buyers.

The Paris-based International Energy Agency estimates that China will produce an average of 3.8 million barrels per day (bpd) in 2018, which would be only 0.5 million bpd less than in 2015.

Ahead this week, market players will be focusing on the release of crude and refined products stockpiles on Tuesday and Wednesday and the weekly rig count on Friday.

Attention will also be directed to the dollar’s dynamic, which has the power to control quotes as commodities are denominated in this currency.

A stronger greenback makes contracts more expensive for investors holding foreign currencies, dampening interest on the commodity.

The US dollar index, which measures the greenback against six major currencies, was trading 0.24 percent lower at 89.60 by the time of this writing.

FortFS