Oil prices are expected to drop to the mid-$70s next year amid a surplus on the market, according to Morgan Stanley.
Currently, the oil market is tight and warrants the $80s per barrel price range, but with seasonal demand starting to abate in the fourth quarter, market balances are set to return, the investment bank said in a note carried by Reuters on Monday.
In the fourth quarter of 2024, the market would be balanced “when seasonal demand tailwinds abate and both OPEC and non-OPEC supply return to growth,” Morgan Stanley’s analysts wrote.
Next year, the market will even tip into a surplus amid rising supply from both OPEC+ and non-OPEC+ producers, the bank’s commodity strategists reckon.
According to the bank, global refinery runs will hit their 2024 peak in August and are not expected to reach this level again until July next year.
That’s why Morgan Stanley expects Brent Crude prices to drop from current levels to the mid $70s to high $70s per barrel range in 2025.
Early on Monday, Brent Crude prices were up by 0.52% at $83.07, while the U.S. benchmark, WTI Crude, was trading 0.49% higher at $80.46.
Morgan Stanley reiterated in the note its price forecast of $86 per barrel Brent oil for the third quarter of 2024.
Goldman Sachs has also recently reaffirmed its outlook from June that
Brent crude prices are set to rise to $86 per barrel this summer amid strong consumer demand which will put the market into a sizeable deficit in the third quarter.
The Joint Ministerial Monitoring Committee (JMMC), the OPEC+ panel monitoring the oil market, is not expected to recommend in August any changes to the current production policy plan of the group, OPEC+ delegates told Bloomberg last week.
When the panel meets again on August 1, the meeting is expected to be a routine one, and no recommendations on oil production policy – other than the OPEC+ group has already announced – are expected to be issued, according to Bloomberg’s anonymous sources among the OPEC+ delegates.
Gold price remains in the red below $2,400 early Wednesday, as markets stabilize.
The US Dollar picks up fresh bids on the USD/JPY upsurge and the US Treasury bond yields upswing.
Gold price teases a symmetrical triangle breakdown on the daily chart.
Gold price is extending its losing momentum into the fifth straight day on Wednesday, approaching the weekly low of $2,364 amid a broadly firmer US Dollar (USD) and an uptick in the US Treasury bond yields.
The US Dollar has come under renewed buying pressure, courtesy of the latest leg higher in the USD/JPY pair and renewed upside in the US Treasury bond yields. Markets appear to have stabilized after the recent turmoil, reducing the haven demand for the US government bonds while lifting the US Treasury bond yields higher across the curve.
The US S&P 500 futures, a risk barometer, reversed early losses to trade 0.55% higher on the day. Meanwhile, Asian markets advance, led by a 4% rally in the Japanese equity indices.
The surge in the Japanese stock markets could be attributed to a fresh sell-off in the Yen after dovish remarks from the Bank of Japan (BoJ) Deputy Governor Shinichi Uchida. Uchida said that the bank “won’t raise rates further if markets are unstable”, adding that it is “appropriate to adjust the degree of monetary easing.”
With the Japanese Yen under fresh downward pressure, USD/JPY spiked nearly 200 pips to 147.50, driving the US Dollar Index higher in tandem. This, in turn, remains a drag on the USD-denominated Gold price even as markets continue to price in aggressive interest-rate cut by the US Federal Reserve (Fed) this year.
Markets are now wagering a 70% chance of the Fed cutting rates by 50 bps in September, the CME Group’s FedWatch tool showed, compared with an 85% chance a day earlier, with major brokerages also anticipating a large rate cut in the next meeting, per Reuters.
Looking ahead, Gold price will remain at the mercy of the risk trends, the USD/JPY moves driven Greenback price action and the expectations surrounding the Fed easing, in the absence of any top-tier US economic data releases. Further, traders will pay close attention to any updates on the geopolitical front, especially with the looming risks of an Iran-Israel war.
Following recent days of volatility on US economic slowdown concerns, the sentiment on Wall Street will also play a pivot role in influencing the value of the US Dollar and Gold price going forward.
Gold price technical analysis: Daily chart
As observed on the daily chart, Gold price finally yielded a daily candlestick closing below the key 21-day Simple Moving Average (SMA) support, then at $2,411.
The decisive break of the latter triggered a renewed downside for Gold price, with the key leading indicator, the 14-day Relative Strength Index (RSI), swinging back into bearish territory. The RSI is currently trading below 50, at 47.50.
With sellers commanding the game, Gold price is set to chart a downside break from a seven-week-old symmetrical triangle formation should the rising trendline support at $2,378 give way on a sustained basis.
If the triangle breakdown is confirmed, the immediate support would be seen at the 50-day SMA of $2,368, below which the $2,350 psychological level will get tested.
Further south, the 100-day SMA at $2,344 could act as a tough nut to crack for Gold sellers.
On the flip side, Gold price needs to recapture $2,400 on a potential rebound, above which the 21-day SMA support-turned-resistance, now at $2,415 will come into the picture.
The next relevant upside target is aligned at static resistance at $2,425.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
U.S. inflation data, showing a monthly decline for the first time in four years, provided support for oil prices.
OPEC’s latest monthly report reaffirmed its expectations of strong demand for crude, anticipating growth of 2.25 million barrels daily for 2024.
OPEC may consider rolling back some production cuts to prevent a significant deficit in the second half of the year.
Crude oil prices were set for a weekly decline despite earlier gains made largely on the back of economic data.
The latest update that caused the benchmarks to climb higher was U.S. inflation data, which showed a monthly decline for June—the first in four years. On an annual basis, however, inflation was up by 3%.
The news of the monthly decline supported prices, with Brent regaining territory to top $85 per barrel after it slipped below this level earlier in the week on CPI data from China where the decline in consumer prices was seen by analysts as a negative rather than a positive, and a potential sign of weaker oil demand in the coming months.
The monthly CPI dip also fueled hopes of an interest rate cut, which has been in the focus of oil traders’ attention for months.
“Cooling US inflation numbers may support the case for the Fed to kickstart its policy easing process earlier rather than later, but it also adds to the series of downside surprises in U.S. economic data, which points to a clear weakening of the US economy,” IG market strategist Yeap Jun Rong told Reuters.
Oil also received some support from OPEC’s latest monthly report, in which the cartel reiterated its expectations of strong demand for crude, seeing growth at some 2.25 million barrels daily for this year.
“Expected strong mobility and air travel in the Northern Hemisphere during the summer driving/holiday season is anticipated to bolster demand for transportation fuels and drive growth in the United States,” OPEC wrote.
If this does pan out, OPEC may decide to go ahead with the rollback of some of its production cuts to avoid what ING’s Warren Patterson called “a large deficit” in a recent second-half forecast. If it doesn’t, however, OPEC will likely stick to its production controls.
The U.S. Energy Information Administration (EIA) has raised its forecast for crude oil demand in the United States, according to the agency’s Short-Term Energy Outlook released today—although its price outlook for this year and next has been revised down.
The EIA now sees U.S. petroleum and other liquid fuels consumption averaging 20.5 million barrels per day in 2024—that’s up from the agency’s forecast in July of 20.4 million bpd.
Globally, the EIA left its total world consumption of crude oil and liquid fuels unchanged at 102.9 million bpd for 2024, revising its 2025 global fuels consumption slightly downward to 104.5 million bpd from 104.7 million bpd. These figures represent growth of 1.1 million bpd this year, and 1.6 million bpd next year.
For Brent pricing, the EIA reduced its forecast for this year and next, lowering its projections by $2 per barrel to $84 per barrel for the full year 2024. For next year, the EIA also revised its forecast down by $2 per barrel to an average of $86 for the full year.
While prices have been recently on a downward trend and the full-year 2024 guidance has been reduced, the EIA continues to expect crude oil prices to rise in the second half of 2024. The Brent spot price ended July at $81 per barrel, the EIA said, but averaged $85 per barrel for the month. The EIA sees Brent returning to between $85 per barrel and $90 per barrel by the end of the year.
The EIA sees these prices rising as we head into the latter part of the year on the back of global crude oil inventories decreasing by 800,000 bpd in the second half.
Initial resistance levels start with the 20-Day MA at 2.11. However, the most recent interim swing high of 2.15 carries greater significance as it makes up part of the downtrend price structure of lower swing highs. A rise above 2.15 opens the door to the next higher interim swing high of 2.27. Once there is a rise above daily close above the 20-Day MA natural gas will be showing indications of a bullish reversal. Further signs of strength will then be needed.
Potential Bullish Falling Wedge
An enhanced view is provided once a falling bullish wedge is identified on the chart. The pattern is bordered by two orange trendlines. It is a bullish pattern as it shows sellers becoming exhausted, which creates space for buyers to take back control. Nonetheless, a breakout trigger would be needed. That is provided on a rise above the top boundary line of the pattern. There are a couple things to be aware of regarding this pattern in natural gas. First, a bullish breakout should be accompanied by strong bullish momentum. Enough to quickly break above the 20-Day line.
Also, the wedge pattern may not be done forming. There may be more of the pattern to complete before a bullish breakout is ready to trigger. If so, natural gas could fall to its next lower target zone that begins at 1.85 yet maintain the parameters of the falling wedge. The lower target zone is identified down to 1.80. If today’s bullish reversal fails before another bullish reversal is triggered, then natural gas is likely heading to the lower price zone before the correction is over.
For a look at all of today’s economic events, check out our economic calendar.
Financial markets are looking to stabilize, but fears persist.
A firm recovery in government bond yields backs US Dollar’s gains.
XAU/USD extends slide within Monday’s range, aims for lower lows.
XAU/USD extends Monday’s losses and trades in the $2,380 price zone as markets abandon panic. On the one hand, stocks are in better shape after collapsing at the beginning of the week, with United States (US) indexes trading in the green after mixed results among their overseas counterparts. The better tone of equities undermines demand for Gold.
On the other hand, government bond yields recovered, with the 10-year Treasury note yield up over 20 basis points (bps) after falling to fresh multi-year lows, supporting the US Dollar against the bright metal. Nevertheless, market players are still concerned about the United States (US) economic health and maintain bets on massive interest rate cuts before year-end.
XAU/USD short-term technical outlook
XAU/USD trades around the 50% Fibonacci retracement of its June/July rally at $2,388.70, and technical readings in the daily chart show that the risk is skewed to the downside. The pair met intraday buyers around the 38.2% retracement of the same run at $2,411.20, while the 20 Simple Moving Average (SMA) converges with the mentioned level, losing its bullish strength. Technical indicators, in the meantime, head south within negative levels, in line with a downward extension.
In the near term, and according to the 4-hour chart, the bearish case is even stronger. Technical indicators resumed their slides within negative levels and after correcting oversold conditions. At the same time, the 20 SMA gains downward traction well above the current level, while XAU/USD keeps putting pressure on a mildly bullish 200 SMA.
Gold price consolidates the rebound after Monday’s risk aversion-led ‘sell-everything mode’.
The US Dollar rebounds with Treasury bond yields and risk appetite, checking Gold price upside.
Increased bets for aggressive Fed rate cuts remain supportive of Gold price.
Gold price defended 21-day SMA at $2,410, acceptance above $2,425 is critical while the daily RSI stays bullish.
Gold price is consolidating the previous swift rebound to near the $2,410 region early Tuesday, as traders absorb Monday’s volatile trading. Gold price struggles to build on the recovery mode amid a solid comeback staged by the US Dollar, alongside the US Treasury bond yields.
Gold price looks to Middle East updates
Following the assurances by the US and Japanese authorities to calm nerves, markets are witnessing a massive positive shift in risk sentiment. The Asian stocks attempt a turnaround, with the Japanese benchmark index – the Nikkei 225, jumping nearly 10% so far, reversing the 12% historic sell-off seen Monday.
With the return of risk flows, the haven demand for the US government bonds fades, putting a fresh bid under the US Treasury bond yields and helping lift the US Dollar across the board at the expense of the non-interest-bearing Gold price.
San Francisco Fed President Mary Daly said early Tuesday, “none of the labor market indicators she looks at are flashing red at present, but she is monitoring carefully.” Daly, however, added that her mind was open to cutting interest rates as necessary and policy needed to be proactive.
Meanwhile, Japanese Finance Minister Shunichi Suzuki said that he is “seeing bright aspects in the economy on wages, investment front.”
Further, diplomats from the US and Arab nations attempt to de-escalate the tensions between Iran and Israel that flared up since Wednesday, when Hamas leader Ismail Haniyeh was killed in Tehran in an attack. Iran blamed Israel, vowing to retaliate, with US intelligence noting that the attack could be panned over multiple days.
The diplomatic efforts to diffuse the situation seem to provide some support to the recovery in risk sentiment. However, traders remain wary of Iran striking back against Israel, as the former said “it didn’t care if the response triggered a war.”
Iran’s foreign ministry spokesperson, Nasser Kanaani, stated on Monday that while Iran does not intend to heighten regional tensions, it believes it must punish Israel to deter further instability.
As the Middle East geopolitical situation remains in a delicate spot, traders are glued to the upcoming developments, refraining from placing any fresh position in the Gold price. However, the downside in Gold price could remain limited, as markets continue pricing in a nearly 90% chance that the US Federal Reserve (Fed) will cut interest rates by 50 basis points (bps) in September, according to the CME Group’s FedWatch Tool.
Additionally, the market has around 115 basis points of easing priced in for this year, and a similar amount for 2025, per Reuters.
Monday’s sell-off in Gold price, despite broad risk-aversion, could be attributed to investors locking in gains in their Gold longs to cover losses elsewhere. Global stock markets were in turmoil amid escalating Middle East tensions and US economic slowdown fears, following the weak US jobs report on Friday.
Gold price technical analysis: Daily chart
As observed on the daily chart, Gold price closed Monday above the key 21-day Simple Moving Average (SMA) support, then at $2,411.
Meanwhile, the 14-day Relative Strength Index (RSI) holds above the 50 level, currently near 52.50, suggesting that the bullish potential remains intact for Gold price.
Gold buyers, however, need acceptance above the static resistance at $2,425 to resume the recovery momentum toward the previous record highs of $2,450.
Further up, the lifetime high of $2,484, reached on July 17, will be on buyers’ radar.
On the flip side, if Gold sellers seek a strong foothold below the 21-day SMA, now at $2,712, the door will open up for a retest of the key confluence support near $2,370. The rising trendline support closes in on the 50-day SMA at that level.
The next relevant downside target is the 100-day SMA at $2,342.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Silver falls below 100-DMA ($28.67), trading at $27.23 after peaking at same.
Technicals suggest more silver declines; key supports at $27.00, 200-DMA at $26.02.
For recovery, silver needs to regain $28.00; resistances at August 2 high of $29.22 and 50-DMA at $29.79.
Silver’s price extended its losses below the 100-day moving average (DMA) of $28.67 and is down over 4.50% as risk appetite deteriorated following weaker data from the United States (US). This reignited recession fears, as ISM Manufacturing PMI and Nonfarm Payrolls report disappointed investors, who flock to safe-haven assets, mostly US Treasuries. The XAG/USD trades at $27.23 after hitting a daily high of $28.67.
XAG/USD Price Forecast: Technical outlook
The grey metal tumbled to a three-month high, with buyers battling to reclaim July’s low of $27.31, which would keep them hopeful of higher prices. However, momentum favors sellers, as shown by the Relative Strength Index (RSI), near hitting oversold conditions in normal trading environments.
If XAG/USD drops and achieves a daily close below $27.00, buyers will be pressured to hold forth at the 200-DMA at $26.02. If broken, sellers will drive Silver spot prices to the latest cycle low at $24.33, the March 27 low.
Conversely, if buyers reclaim $28.00, the next resistance would be the August 2 peak at $29.22. Further upside is seen once cleared, with the next supply area at the 50-DMA at $29.79
XAG/USD Price Action – Daily Chart
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold’s. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold’s moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
The first thing I notice is that every time we rally in this market, it’s very difficult to hang onto those gains.
At this point in the year, that makes a lot of sense and it’s probably worth noting that the spot market is closed at the psychologically important $2 level.
This obviously will attract a lot of attention, and therefore I think you will see the market continue to respect this area.
This is not to suggest that the market is likely to look at this as a “floor in the market”, but at this point in time I do think it will lease cause a bit of hesitation. If we break down below the $2.00 level, then it’s likely that the market goes looking to the $1.90 level. I do believe that there is an opportunity here, but you need to be cautious about jumping in with a huge position right away.
Cyclicality
Keep in mind that there is a cycle to the natural gas markets, and I am going to play this as an investment. I like the idea of buying little bits and pieces with no leverage, in order to set up for the eventual rally as we head toward the cooler temperatures later this year. That being said, you have to be very patient and wait for the market to turn things around in order to get long again, at least with any size. However, if you don’t have any leverage and are using a small position, you can build up a position that will pay you later in the year, all things being equal.
If the market were to turn around and break above the $2.20 level, then we have a situation where the market will continue to go higher, perhaps reaching toward the 200-Day EMA. While I don’t necessarily think this is completely impossible, I think it’s very unlikely at this point in time. For what it is worth, there is a lot of noise just below the $2.00 level that could keep this market somewhat buoyed.
Concerns about US economic health and Middle East tensions spurred risk aversion.
Treasury yields fell sharply, pushing the US Dollar up against Gold.
XAU/USD corrected from a critical support level, but risk is still skewed to the downside.
Risk aversion hit hard financial markets at the beginning of the week, triggering volatile movements across all boards. XAU/USD plummeted to $2,364.19 ahead of Wall Street’s opening, bouncing afterwards to trade around the $2,400 mark at the time of writing, still sharply down on the day. The US Dollar surged against the battered bright metal as concerns about the United States (US) economic performance and escalating tensions in the Middle East put markets in panic mode.
On the one hand, US growth and employment-related data released last week triggered alarms about a potential recession in the world’s largest economy, up to the point that speculative interest began considering an out-of-schedule interest rate cut in the upcoming days. On the other, airstrikes between Israel and the Palestinian Hamas group led to multiple deaths over the weekend, particularly hitting schools and hospitals. Menaces of retaliation came from both sides, spurring concerns they would fall into an all-out war.
Stock markets plummeted in Asia, with the Nikkei 225 having its second-worst day ever. European and American indexes also edged lower, although things stabilized after the US released the ISM Services PMI, which surged in July to 51.4 after posting 48.8 in June. The reading also surpassed the expected 51, pouring some cold water on market concerns.
Helping Gold, government bond yields trimmed early losses after the US opening. The 10-year note Treasury yield fell to its lowest in a year, backing the case for a XAU/USD slide. The note offered as low as 3.66%, with the latter recovery towards the current 3.78% level supporting the current intraday bounce.
XAU/USD short-term technical outlook
The daily chart for XAU/USD shows the pair met buyers around the 61.8% Fibonacci retracement of its June/July rally at around $2,366, a critical support area. However, technical indicators keep heading south, reflecting continued selling interest. Even further, the pair is developing below the 38.2% retracement of the aforementioned rally and a still bullish 20 Simple Moving Average (SMA), both located around $2,411.20.
In the near term, and according to the 4-hour chart, the case for a continued advance seems limited. Technical indicators have lost their ascendant strength below their midlines and after correcting oversold conditions, skewing the risk back to the downside. At the same time, the pair trades below the 20 and 100 SMAs, with the shorter one gaining downward traction, supporting the case for another leg south.
