Oil and gold

The recent oil price recovery is likely to be capped by abundant supply while the gold price recovery could be short-lived.

Crude oil prices (WTI) rose to above US$50/bbl on July 31 but have subsequently fallen back slightly. Even so, they have still risen by more than 10% since their recent low on July 7. The recent rise in prices has been helped by US official estimates that stockpiles fell by 3.3 million barrels last week, the fifth consecutive weekly drop.


Still, it is important to note that global oil production is likely to remain high. OPEC production is slightly higher than that at the start of the year (32.55 million barrels a day, versus 32.23 million barrels per day on January 31), when the cartel implemented its November 2016 agreement to cut oil output. Moreover, US oil rig counts remain much higher than a year ago. Oil rigs numbers rose slightly last week to 766, more than twice that of a year ago. 

 

“Global supply and a forecasted rebound in USD strength will likely cap sustained gains [in oil prices]”

 

Over the next twelve months, higher global demand (resulting from an improved world growth and a resilient China) will remain supportive of prices above US$45/bbl, but global supply and a forecasted rebound in USD strength will likely cap sustained gains closer to US$50/bbl levels. We expect WTI prices at US$50/bbl at end-June 2018.

Meanwhile, gold prices have risen to around US$1,270/oz from a recent low of US$1,214/oz on July 10. The weak USD has been a critical driver. We forecast gold prices at US$1,200/oz at end June 2018. A rebound in the USD along with an expected two further rate hikes by the US Federal Reserve should lower gold prices slightly from current levels. 

Source: Bloomberg Finance L P, Deutsche Bank AG. Data as of August 2, 2017.

 

Markus Müller
Global Head

CIO Office
Source: CIO Bulletin, Aug 4, 2017