Commodity market: Oil skids over tepid demand, gold gains on weak dollar

The oil market has experienced a 16 percent decline since late September.

Oil futures saw a decline on November 21, reversing the gains from the previous day. The drop was attributed to concerns over weaker demand amid a slowing global economy, which overshadowed the potential for deeper supply cuts by OPEC and its allies like Russia.

Brent crude futures dropped 0.4 percent to $81.96 a barrel, and US West Texas Intermediate crude declines 0.4 percent to $77.50 a barrel.

On November 20, both contracts had risen about 2 percent after reports suggested that OPEC+ might consider additional oil supply cuts during its upcoming meeting on November 26.

The oil market has experienced a 16 percent decline since late September. Factors contributing to this include record-high crude output in the US, concerns about demand growth, particularly from China, and the possibility of a US recession in 2024.

Additionally, warnings about potential deflation from major retailers like Walmart have influenced market sentiment. These factors have led traders to closely monitor global economic indicators and assess the potential impact on oil demand.

Goldman Sachs has suggested that, based on its statistical model of OPEC decisions, deeper cuts should not be ruled out. The analysis takes into account factors such as the decline in speculative positioning, changes in timespreads, and higher-than-expected inventories. The assessment implies that OPEC may consider additional oil supply cuts during its upcoming meeting on November 26.

In the bullion market, gold prices soared, driven by a weaker US dollar and Treasury yields. Spot gold was up 0.7 percent at $1,991.69 per ounce, while US gold futures have gained 0.6 percent to $1,993.50.

The upward movement in gold prices is influenced by factors such as the US dollar's performance and expectations regarding the Federal Reserve's interest rate policies. Investors are keenly awaiting the minutes from the Federal Reserve's recent meeting for more insights into its outlook on interest rates.

The relationship between the value of the US dollar and the price of gold often varies inversely. When the US dollar weakens, gold becomes less expensive for holders of other currencies, leading to an increase in demand for gold.

(With agency inputs)