Commodity markets rallied across the board because the political turmoil inside the US reignited, sparking a weaker USD, which helped in growing investor appetite in commodities.
KEY COMMODITY MARKET CONSIDERATIONS
Crude Oil:
Crude oil rates persisted to trend higher as the market turns into an increasingly confident that OPEC members will commit to a rollover in the production cut agreement. Azerbaijan joined the refrain of requires an extension; but it favors continuing to the cease of 2017 (instead of Q1 2018). Charges have been also supported with the aid of the broad weak point in the USD. Sentiment was also buoyed via signs of strong demand.
Qatari oil minister Mohammad al-Sada joined a growing number of major oil producers calling for an extension to the OPEC and non-OPEC output cut deal to the end of March 2018, Platts reports.
According to him, after nearly three years of buildup in oil stocks, the process of rebalancing was "finally gaining momentum"
"We are optimistic that the extension of the agreement to the second half of this year will improve market stability, due to the higher expected demand in Q3 and Q4. This is further supported by the fact that the world economic situation is progressively improving"
"We also see merits of extending the agreement further to the first quarter of 2018, when demand is seasonally lower"
Current Crude Oil Status:
Currently, Crude Oil is trading at 50.73, up + 0.79%, having posted a daily high at 50.89 and low at 50.58.
Gold:
Gold continues to be supported by US political turmoil, with prices threatening to break through USD1260/oz.
US long-term inflation expectations as represented by the 10-year breakeven inflation rate are a big driver of gold prices. The metal being a hedge for inflation usually tracks inflation expectations higher/lower.
The 10-year breakeven inflation rate; the yield difference between 10-year Treasury Inflation Protected Securities (TIPS) and regular 10-year Treasury notes; dropped to 1.78% last week; the lowest level since November 10.
However, gold remained well bid on rising political tensions in the US. Moreover, the metal has rallied from $1222 (May 10 low) to $1264 (last week’s high) mainly due to the turmoil in Washington.
It also means that once the political uncertainty dissipates, the risk premium would evaporate and the metal would fall back in line with the weakening inflation expectations.
Current Gold Status:
Currently, Gold is trading at 1,253.16, down -0.22%, having posted a daily high at 1,257.79 and low at 1,251.85.
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