Gold and Oil Futures Rally as OPEC+ Cuts and Dollar Influence Markets

As France reopens its last of four domestic refineries after a month-long strike, demand for oil is expected to rise. This comes alongside industry data on U.S. crude stockpiles that are anticipated to have fallen by 1.3 million barrels in the week to April 7, according to a Reuters poll.

UBS Group AG predicts that oil prices will increase toward $100 a barrel in the coming quarters, partly due to the halt in Kurdish oil production. Citigroup Inc., however, believes that prices may fall below $80 a barrel, considering China's slower-than-expected recovery and potential economic slowdowns in the West.

Natural gas futures rose in U.S. trading on Tuesday, while gold and silver prices benefited from a weaker U.S. dollar, signs of cooling inflation in China, and the International Monetary Fund's commentary on interest rates being transitory. Key market metrics showed renewed strength after OPEC+ announced its output cuts, with the December-December spread rallying to over $5 a barrel.

Russia's seaborne oil exports collapsed last week, further tightening the market. Approximately half a million barrels a day of crude supply from Iraq's semi-autonomous Kurdistan region remains halted, with negotiations needed before flows can resume.

Despite lower-than-expected consumer inflation in China, oil futures climbed around 7% after OPEC and its allies, including Russia, announced further production target cuts for May. OPEC's output is expected to fall by 500,000 barrels per day (bpd) in 2023 and rise by 1 million bpd in 2024, while non-OPEC liquid fuels production is predicted to grow by 1.9 million bpd in 2023 and 1 million bpd in 2024, according to the Energy Information Administration (EIA).

Gold investors await U.S. inflation data scheduled for release this week, which will help determine the near-term trajectory for interest rates. Meanwhile, oil prices rose approximately 2% on Tuesday, driven by hopes that the Federal Reserve might ease its policy tightening following the upcoming U.S. inflation report. However, concerns over Chinese demand still linger.

Brent crude futures settled up $1.43 or 1.7%, at $85.61 a barrel, while U.S. West Texas Intermediate futures rose $1.79 or 2.2%, to $81.53 a barrel. Investors are optimistic that the U.S. Federal Reserve is nearing the end of its cycle of interest rate hikes, which would make dollar-priced oil cheaper for buyers holding other currencies.

Crude held its gains after the U.S. Energy Information Administration reported only a slight increase in U.S. production compared to previous forecasts. The Organization of the Petroleum Exporting Countries and the International Energy Agency are also scheduled to issue monthly reports later this week.

Natural gas futures firmed during U.S. trading, while gold futures rose during European trading. On the Comex division of the Nymax exchange, gold futures for June delivery were trading at $2,016.35 per ounce at the time of writing, up 0.63%. Meanwhile, on Comex, silver for May delivery rose 0.90% to $25.14 an ounce, and copper for May delivery traded up 1.89% at $4.05 a pound.