Saudi cuts drive oil price surge

Some analysts were worried that the price could fall again as some major economies went back into lockdown amid a surge in COVID-19 infections. (AP/File)
Some analysts were worried that the price could fall again as some major economies went back into lockdown amid a surge in COVID-19 infections. (AP/File)
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Updated 12 January 2021

Saudi cuts drive oil price surge

Saudi cuts drive oil price surge

DUBAI: Oil prices surged back to pre-pandemic levels on Tuesday in the wake of Saudi Arabia’s surprise decision last week to cut output by an extra 1 million barrels a day.

Brent crude, the international benchmark, rose above $56 a barrel for the first time since February 2020, before economic lockdowns hit worldwide demand for oil, especially transport fuels.

After a divided meeting last week of OPEC+, the alliance led by Saudi Arabia and Russia, Saudi Energy Minister Prince Abdul Aziz bin Salman promised to cut an extra 1 million barrels for the next two months as a “gesture of goodwill” to global energy markets. “We will support the market and we will support the industry. We are the guardians of the industry,” he said.

Some analysts were worried that the price could fall again as some major economies went back into lockdown amid a surge in COVID-19 infections. The Saudi move has headed off that threat, and experts are now revising their forecasts.

Damien Courvaln, analyst at Goldman Sachs, said: “The unilateral and unexpected production cut from Saudi Arabia will offset the near-term negative hit to demand from a quickly spreading virus.” Goldman Sachs forecasts that oil will reach $65 a barrel this summer, earlier than expected.

Eugen Weinberg of Commerzbank said: “Saudi Arabia is ensuring through its additional voluntary cuts that the market is undersupplied, if anything.”

Rising oil prices could also allow beleaguered American shale producers to boost production, but Courvain said slow change in US oil activity this year would be slow unless West Texas International, the US standard, rallied to the $60-$65 range.

WTI was at $53 a barrel yesterday, also a post-pandemic best.
 


Gold ticks up on weaker dollar, US stimulus hopes

Gold ticks up on weaker dollar, US stimulus hopes
Updated 12 min 3 sec ago

Gold ticks up on weaker dollar, US stimulus hopes

Gold ticks up on weaker dollar, US stimulus hopes
  • Spot gold rises 0.1 percent to $1,854.95 per ounce by 0329 GMT
BENGALURU: Gold prices gained on Monday as the dollar eased and hopes that a massive economic stimulus in the world’s largest economy would be passed remained intact.
Spot gold rose 0.1 percent to $1,854.95 per ounce by 0329 GMT, recovering from a 0.9 percent decline in the previous session. US gold futures eased 0.1 percent to $1,854.30.
President Joe Biden’s administration tried to head off Republican concerns that his $1.9 trillion pandemic relief proposal was too expensive on a Sunday call.
“We’re seeing bigger question marks over the passage of Biden’s stimulus package, Senate Republicans are starting to stand a bit more objectionable with particular parts of the package,” said Lachlan Shaw, National Australia Bank’s head of commodity research.
“So it does raise the question about the speed and the timing of the package.
(Although,) some of the issues of the vaccine delays in the US are perhaps tilting the balance in odds of favor of that stimulus,” Shaw added.
The dollar was down 0.1 percent against rival currencies, making gold cheaper for holders of other units.
Gold is considered a hedge against inflation, likely from widespread stimulus.
Also supporting the precious metal, global coronavirus cases rose to more than 98 million as countries struggled to increase the pace of vaccinations.
Investors now await the US Federal Reserve’s policy meeting due on Jan. 26-27.
“The Fed is likely to take the conservative course and wait for additional data and assume fragility, given the short-run effects of tackling COVID in the US more aggressively could weaken sales and domestic economic activity,” said Nicholas Frappell, global general manager at ABC Bullion.
“The longer term outlook and technical support remain bullish so above $1,840, look for moves back to $1,870-$1,880.”
Silver gained 0.7 percent to $25.58 an ounce, platinum rose 0.1 percent to $1,099.61, and palladium added 0.1 percent to $2,354.47.