Energy and precious metals-weekly review and calendar

Barani Krishnan is trying to do smart things by giving the UAE the output increase they seek and the smallest output increase in the other 22 countries in the alliance until the greater impact of Covid’s Delta variant plays out in the coming months.

Compared with the actions of the oil cartel in the past two weeks, this is relatively “smart”.

As my colleague Andy Hecht (Andy Hecht) did last Friday, when President Joe Biden took office, he curbed U.S. production through a green energy policy and gave a gift to oil drillers outside the U.S. gift. I have been involved in the industry for more than 20 years, and I would say that such benefits are hard-won.

OPEC+ is indeed pleased with the decline of American oil and takes it to the extreme.

Even so, as Hecht said, the conflict between Saudi Arabia and the UAE over production levels in August initially gave the impression that the cartels “are doing their best to shoot themselves.” Those who are optimistic about oil for a long time will agree: The struggle between Saudi Arabia and the UAE in the past 10 days has caused OPEC+ to lose more than $5 per barrel, and the price of US crude oil fell from a seven-year high of $76.98 on July 6 to July 16. The closing price was $71.81.

However, a new report on Sunday showed that OPEC+, which consists of 23 countries, has reached a compromise on the needs of the UAE. The organization combines 13 members of the Organization of Petroleum Exporting Countries led by Saudi Arabia with 10 other oil producing countries led by Russia. together.

The producer organization announced on Sunday that it will increase its supply by another 2 million barrels from August to December, which means an increase of 400,000 barrels per month in the next six months. This is exactly what the alliance came to the negotiating table two weeks ago before Saudi Arabia and the UAE broke up.

The UAE will also gain more. Starting in May 2022, its benchmark production will increase from today’s 3.168 million barrels to 3.5 million barrels per day, of which production cuts are being calculated.

OPEC+ also agreed to new production quotas for several member states from May 2022, including the UAE, Saudi Arabia, Russia, Kuwait and Iraq.

The benchmark daily output of the Saudis and Russians leading the cartels will rise from the current 11 million barrels to 11.5 million barrels per day.

According to Reuters calculations, the overall adjustment will increase the supply of 1.63 million barrels per day from May next year.

The agreed net increase of 2 million barrels in the next five months is still lower than the expected 3.5 million barrels of demand growth during the period. But this demand estimate was also made before the Covid outbreak caused by Delta Air Lines that we have seen in recent weeks.

To be sure, the oil demand in the next five months is uncertain, although it is expected to be large. Similarly, it is not known what the wave of the pandemic from autumn to winter will be, although it may also be severe.

In the United States, which has led the world in vaccinating the virus, the number of new coronavirus cases has risen again, and the more infectious Delta variant has exacerbated this situation.

Biden said on Friday that his government is preparing for an “unvaccinated pandemic” because the recent outbreak seems to mainly involve people who refuse to be vaccinated for political and other reasons.

The President of the National Institutes of Health, Dr. Francis Collins, said earlier this week that the United States is “wasting time” in an effort to get more than half of the population fully vaccinated by the end of summer. “Delta variants are spreading, people are dying, and we can’t actually wait for things to become more rational,” Collins said.

According to the US Centers for Disease Control and Prevention, most Americans have been vaccinated for several months, but still only 48.2% of countries are fully vaccinated-and the rate of new vaccines is declining.

At the same time, the case rate has been rising sharply. According to data from Johns Hopkins University, in 47 of the 50 states in the United States, the rate of new cases in the past week was at least 10% higher than the previous week. Among them, 35 states have increased by more than 50%.

OPEC+ tries to increase production wisely, because only time will tell how demand for oil compares to pandemic conditions.

Oil price overview

Even after a small increase in crude oil prices on Friday, oil prices were still their worst week in months.

The US oil benchmark traded in New York, after closing up 16 cents, or 0.2%, to US$71.81 per barrel on Friday, the final trading price before the weekend was US$71.46. But this week, WTI fell by US$2.75, or 3.7%. This is the biggest weekly drop in US crude oil since the week of March 14.

The global oil benchmark traded in London rose by 12 cents or 0.2% on Friday, and finally traded at $73.14 before the weekend to close at $73.59. This week, Brent crude oil fell by $1.96, or 2.6%, the biggest weekly drop since the week ended May 14.

Energy market calendar in advance

Monday, July 19

Cushing inventory data from surveyor Genscape

Tuesday, July 20

Weekly report on oil stocks.

Wednesday, July 21

Weekly Environmental Impact Assessment

Weekly Environmental Impact Assessment

Weekly Environmental Impact Assessment

Thursday, July 22

Weekly Environmental Impact Assessment

Friday, July 23

Baker Hughes Weekly Survey

Overview of the gold market and prices

Despite closing lower on Friday, gold still rose for the fourth consecutive week. Although gold has returned to the key $1,800 support level, it appears to be taking time to make progress on this channel.

The benchmark index of the New York Mercantile Exchange had a final trading price of US$1,812.60 before the weekend and closed at US$1,815, down 14 US dollars or 0.8%. This week, it rose by $4.40, or 0.2%.

Since falling to a two-month low of $1,761.20 at the close of the market five weeks ago, gold has risen by more than $45, or 2.6%, in August.

However, it is uncertain how much the current inflation trend in the United States will have on gold, which is often referred to as a hedging tool to hedge against rising price pressures.

Federal Reserve Chairman Jerome Powell (Jerome Powell) gave Congress a biennial testimony this week that the central bank stubbornly hopes to maintain a monthly bond purchase plan of $120 billion and an ultra-low interest rate of 0 to 25% at least. year.To calm the audience of American lawmakers, Powell recited his Spell Regarding US inflation: It is currently “temporarily higher”, but it will subside.

Although Powell made the above remarks on Wednesday, the price of gold rose by nearly 1%, but due to the strong report of the United States in June that pushed the price of gold soaring, it could not maintain most of the increase by Friday.

Ed Moya, an analyst at OANDA in New York, said: “Although Fed Chairman Powell testified to Congress, despite his dovish assurances, it is still not enough to justify the rise in gold prices.”

Gold may have a harder time gaining traction next week, with Fed officials entering their typical speech pause before the Federal Open Market Committee’s monthly review of monetary policy.

“Before we go beyond the decision of the Federal Open Market Committee on July 28, gold may continue to oscillate,” Moya said.

Disclaimer: Barani Krishnan uses a range of viewpoints outside of his own to bring diversity to his analysis of any market. Regarding neutrality, he sometimes put forward contrarian views and market variables. He has no positions in the commodities and securities he wrote about.

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About the Author: Agnes Zang