Bullish rally in the oil market | 15 January 2021

#WTI:

The Saudis’ surprise offer to cut 1 million barrels a day of their oil output in the next two months sent crude prices up 8%on the last week. “The cut is the goodwill of the Saudi Crown Prince,” Saudi Energy Minister Abdulaziz bin Salman said. “We will support the market … we are the guardian of this industry,” the minister said, estimating that Saudi oil output will be at 8.125 million barrels per day on Feb 1, ahead of the planned 1.0-million bpd cut. The action, combined the sharp drop in U.S. inventories to start the year, has served as a reminder that every price cycle in oil sows the seeds of the next one: the collapse of financing for U.S. shale drillers and the heavy cutbacks in capital spending by international oil majors last year must inevitably tighten supply this year, relative to its previous baseline.

Trading recommendation: Buy 50.70 and take profit 52.15.

#SP500:

The Democrats winning effective control of the Senate, giving President-elect Joe Biden scope to push through more spending. The party in control is going to want to inject a lot of stimulus and spending into the economy which in the near-term will be good for economic growth and the stock market. Biden has also said he plans to push out at least two more comprehensive stimulus packages that could add trillions to the U.S. federal debt. The S&P 500 closed above 3,820 points for the first time. The S&P 500 posted 82 new 52-week highs and no new low.

Trading recommendation: Buy 3785 and take profit 3831.

XAUUSD:

The first fallout from rising U.S. Treasury yields has emerged, with a stronger dollar buffeting gold. Treasury 10-year yields climbed to 1.09%, the highest since March. The surge in the key global benchmark yield is raising the prospect of a pause in the dollar’s recent slide, which could undermine the rally in gold. For now, the rise in U.S Treasury yields triggered by the Democratic Senate wins shouldn’t be sustainably bullish for the dollar. The Federal Reserve will eventually monetize the additional bond supply and help weaken the dollar.

Trading recommendation: range 1790 -1850.