Today is a day off in most trading venues in Europe and America with limited commodity market dynamics. However, it is an excellent reason to take a closer look at the recent developments in oil and gold. During another OPEC+ meeting, production quotas remained roughly unchanged in April, assuming production of 7m BPD below last March’s levels. Separately, Saudi Arabia will voluntarily remove a further 1m BPD from the market.
May-June quota increases of 350k b/d and July quota increases of 450k b/d are planned. These are less drastic increases than the stipulated 500k b/d per month since February. Saudi Arabia will further ramp up production, splitting the return of the voluntarily reduced 1m BPD over the next three months.
Oil volatility late last month appears to have forced the cartel to raise production more cautiously, despite notable improvements in the US and Chinese macroeconomic indicators. Robust production data from primary oil consumers, the world’s top two economies, allowed oil to stay within the upward trend. Brent once again found support on the downside to its 50-day moving average and gained more than 3% by Thursday’s close. Further improvement in the macroeconomic outlook could continue to push the price higher and bring Brent back above $70 in April.
However, traders will need to pay more attention to US production dynamics, which could be boosted by favourable price conjuncture.
Gold gained support earlier in the week on the downside to the March lows at $1680 and the long-term upside trend support line from mid-2019. Interestingly, gold has been walking on the edge of a bull market this week. A drop below $1660 would be a 20% failure from last August’s peaks, formally entering the bear market stage. In case of a further bounce in the gold price, traders should look out for the dynamics near $1750. Earlier in March, the rebound lost strength near those levels. A decisive break above would mark greater buying power. Additionally, a jump in the price above $1770, where the 50-day average passes and the December lows area are located, would cement a correction in gold and a return to the upside.