OPEC cuts production, gold pares gains

OPEC+ boosts oil prices after large cut

Oil prices are edging lower today after OPEC+ announced a huge production cut on Wednesday of two million barrels per day. With the group failing to hit output targets by a widening margin as the year has progressed, the net cut will be around half that, if not less, but that’s still a substantial reduction in an already tight market.

Of course, the global economy is slowing as a result of an inflation and interest rate shock – which soaring oil prices and underproduction is partially responsible for – and that should weigh on demand over the next year offering some balance. But that is highly uncertain so it’s understandable that the backlash has started as higher oil prices will only compound inflation and cost-of-living issues in the interim.

Gold relief rally over?

Gold is paring gains again today after a strong relief rally earlier in the week. The yellow metal was buoyed by a softening dollar and lower yields but both are bouncing back. It was always likely to face strong resistance above as the rally was driven more by hope than substance. A weaker jobs report tomorrow could give it another boost but even that may prove to not be sustainable.

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