Oil higher after Biden’s trip disappoints
Crude prices are back where they belong, over the USD 100 a barrel level, after President Biden’s trip to the Mideast did not yield any oil commitments by the Saudis. Boosting oil was also a weaker dollar that stemmed from a broad rebound for risky assets.
The oil market will remain tight as the latest earnings updates reinforced how strong the US economy remains. The short-term crude demand outlook should stabilize here as the US consumer is still spending and as airlines still see demand despite higher prices.
Gold prices are rebounding as the dollar softens alongside easing Fed rate hike expectations. For a brief period, it seemed like the Fed might need to justify a 100-basis-point rate hike this month, but that risk has eased. The Fed might not need to tighten policy as aggressively as markets were initially thinking, but the rate hiking cycle could last into early next year.
The dollar is weakening to start the trading week, but this might not be the top, which means gold might struggle to make a move above anywhere close to the USD 1750 level. The dollar might take a bigger cue from the ECB rate decision and if Russia delays in restart of the Nord Stream 1 pipeline.
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