Crude Oil, Gold, Natural Gas Forecast: Traders Eye US NFP Report and Heatwave

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Crude Oil, Gold, Natural Gas – Talking Points

  • Crude oil rally takes a break ahead of OPEC production announcement
  • Gold outlook likely hinges on the US non-farm payrolls report due Friday
  • Natural gas prices continue to soar as heatwave grips Western US

Crude oil prices fell on Monday, with downside pressure likely to continue this week. The Organization of Petroleum Exporting Countries and allied producer Russia, together part of OPEC+, are expected to increase supply production. The oil cartel will meet later this week on Thursday when RBC Capital Markets expects an increase of anywhere from 500,000 to 1 million barrels of oil per day.

The group, which controls a large swath of the world’s total capable oil output, has been hesitant to ramp up supply amid the ongoing recovery. However, economic demand has steadily picked up in recent months as vaccination efforts aid reopenings around the globe. That said, the risks to the recovery are far from gone. The highly transmissible Delta variant of Covid is dinging efforts and injecting fear into the recovery’s path.

In fact, Australia entered a two-week lockdown over the weekend, with Sydney – the country’s most populated city – included. The United Kingdom, where the Delta variant first is thought to have spread – has had trouble containing its spread, despite the country’s high vaccination rate. Health officials fear the variant may quickly become the dominant strain in the United States.

Crude Oil Daily Chart

crude oil

Chart created with TradingView

Gold prices are trading fairly muted so far this week. That is no surprise given the influences at work in the market for the yellow metal. Gold saw a big drop earlier this month when the US Dollar was sent soaring due to a hawkish shift in the Federal Reserve’s outlook. Front-end government bond yields saw some of the most impact, with the 2-year rate hitting the most since April 2020.

This week will bring a further development that will likely influence how traders may price Fed tapering expectations.. The highly anticipated non-farm payroll report (NFP) is set to release on Friday. Analysts expect the June figure to cross the wires at +690k versus the prior month’s +559k print. The unemployment rate is seen dropping to 5.7% from 5.8%, according to the DailyFX Economic Calendar. That said, a better-than-expected print may fuel hawkish Fed bets and drive up the USD with it. If so, gold prices may suffer.

Gold Daily Chart

gold

Chart created with TradingView

Natural gas prices have seen a surge of bullish energy in the past couple of weeks as a severe heatwave gripped a large portion of the Western United States. The soaring temperatures have sent energy demand soaring as consumers use air conditioning. The mercury reading is forecasted to remain elevated through this week. The Energy Information Administration (EIA) is due to report inventory levels on July first.

The EIA’s inventory report last week showed an injection of 55 billion cubic feet (Bcf) in storage for the week ending June 25. Given the extreme temps throughout portions of the US and Canada, that level may decrease for the next reading, which could lead to further upside pressure on natural gas prices. Prices reached a fresh multi-year high this week.

Natural Gas Weekly Chart

nat gas

Chart created with TradingView

Commodities TRADING RESOURCES

— Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwateron Twitter

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