On Wednesday, Brent crude posted relatively strong gains; the front-month contract on Brent (ICE) was trading well above 110 USD per barrel (USD/bbl) level later in the afternoon. The oil price rose even though the US crude and products stocks were bearish. However, bearish data were overshadowed by optimistic expectations ahead of the FOMC meeting and an upside revision of International Energy Agency’s outlook for next year’s demand growth (which, however, still remains sluggish at 0.865 million barrels per day). Let us also recall that January’s contract expires tomorrow and that the price of February contract is seen just shy above 108 USD/bbl. Regarding the OPEC meeting, it brought no surprise as concerns the official output quota (remains at 30 million barrels per day) as well as a commitment to pump more crude if needed.
However, the meeting pointed out to a rising rivalry among the two strongest members of the cartel – Saudi Arabia and Iraq (which is now the second largest producer among the OPEC countries) – about the responsibility for cutting oil production in case the oil price falls to uncomfortable levels. Iraqi official refused to play such a role and said that the countries which boosted their production in recent years (i.e. Saudi Arabia) should do so.
Despite additional measures announced by the Fed yesterday, the price of gold falls below support at 1700 USD per troy ounce today in early trading. According to Reuters, Asian demand for the metal has been picking up due to pre-stocking ahead of the year-end holidays. Moreover, if the price falls further, this might spur some buying in India as local customers are relatively sensitive to the prices.