Oil stable as tropical storms hammer the US Gulf Coast
Oil prices are slightly flat on Tuesday, but crude oil continues to trade near the upper end of the latest range. As the Gulf Coast has been hit by two tropical storms this week, it may come as a surprise that oil prices have not jumped a little more as they would have done before, but the situation is very different now. Marco’s downgrade may be a factor, but with Laura potentially being upgraded, we’ve historically had a bigger impact.
The difference this time is that we are in the midst of a pandemic, one that has played havoc with the oil industry and forced huge production cuts once inventories have swelled. This is not a balanced market or a deficit, there is ample supply, so it is unlikely that any deficit here will cause problems. The result is subdued oil trade, as attention continues to be paid to the far more important factors, such as a vaccine.
Gold flat after Monday’s return
Gold is a bit flat the day after giving up early gains on Monday to end the session in the red. The continued fightback in the dollar amid higher yields ruined the momentum for gold last week, just as it was about to make a comeback. A small reversal yesterday again sucked the life out of the yellow metal and let it trade around USD1930, still high levels historically but somehow for the highs earlier this month.
The dollar has withdrawn about two-thirds of the losses it suffered a few weeks ago when it plunged under key support, which could make the coming days really interesting for the greenback and again gold. Should the dollar now turn lower, it could suggest that last week’s demonstration was nothing more than a corrective move in a broader decline, giving gold renewed momentum. On the flip side, a break above 94 in the dollar index could spell trouble for the yellow metal.