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CRUDE OIL & GOLD TALKING POINTS:

  • Iran continues to oppose preliminary OPEC+ output increase deal
  • Crude oil prices may fall on fears of free-for-all absent an accord
  • Gold prices may resume drop as US PMIs fuel Fed rate hike bets

All eyes are on a gathering of OPEC+ officials in Vienna on Friday. Officials from cartel members and like-minded oil-producing countries will lay out an update to their coordinated output cut scheme. After weeks of back-and-forth sparring, Saudi Arabia and Russia have reportedly reached a preliminary deal with most of their counterparts to boost crude supply by 1 million barrels per day.

Some countries are unable to ramp up capacity to such an extent, so the actual increase may amount to a more modest 600k barrels per day. Iran continues to oppose even this limited, which is presumably designed in large measure to counter a demand-destroying price spike that might follow after its shipments are derailed by new US sanctions. It says a final accord at this meeting is unlikely.

CRUDE OIL MAY FALL IF OPEC+ DEAL-MAKING FAILS

Interestingly, crude oil prices may fall harder if OPEC+ officials fail to reach common ground than if they do. A net increase of 600-800k barrels per day is probably priced in already and the announcement of such a modest boost may even trigger a relief rally. Alternatively, the absence of a deal may unleash a free-for-all, removing a check on swing suppliers like the US and potentially flooding the markets anew.

GOLD DROP MAY RESUME ON US PMI DATA

Meanwhile, gold prices will look to June’s US PMI data for direction. The yellow metal paused to digest losses amid a lull in negative news-flow yesterday, as expected. If the PMI roundup echoes the broad tendency of US data to top consensus forecasts in recent months, the selloff may resume as Fed rate hike speculation finds fresh fodder.

See our guide to learn about the long-term forces driving crude oil prices!

GOLD TECHNICAL ANALYSIS

Gold prices continue to test support in the 1260.80-66.44 area. A daily close below it opens the door for a test of the December 2017 low at 1236.66. Alternatively, a turn back above support-turned-resistance marked by the May 21 low at 1282.27 exposes the $1300/oz figure anew.

Crude Oil Prices May Fall Even If OPEC+ Output Boost Talks Fail

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are oscillating in a familiar range above support in the 63.96-64.26 area. A break lower confirmed on a daily closing basis initially exposes the April 6 low at 61.84. A break of resistance in the 66.22-67.36 zone is needed to overturn the near-term bearish bias. The 68.64-69.53 region follows thereafter.

Crude Oil Prices May Fall Even If OPEC+ Output Boost Talks Fail

COMMODITY TRADING RESOURCES

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter