On Tuesday, oil prices surged as the U.S. and Europe prepared new penalties to punish Russia for alleged war crimes in Ukraine, heightening fears of a worldwide supply shortage. At the same time, Iran’s nuclear talks with world powers paused.
Brent crude was up 90 cents, or 0.8 percent, to $108.43 a barrel at 0801 GMT, and U.S. West Texas Intermediate was up 78 cents, or 0.8 percent, at $104.06 a barrel. The West is planning new sanctions to punish Russia for civilian deaths in Ukraine. According to U.S. President Joe Biden’s national security adviser, new penalties on Russia will unveil this week.
According to OANDA senior analyst Jeffrey Halley, there were growing predictions that Europe would take steps to curtail transactions with Russia’s energy sector, further squeezing supply.
Last week, US-allied countries agreed to their second coordinated oil release from strategic reserves to lower oil prices in a month. However, Koichi Hagiuda, Japan’s industry minister, said on Tuesday that the International Energy Agency (IEA) was still looking into the facts of the release. Following his remarks, oil prices increased by more than $2.
Despite various market concerns, Ole Hansen, head of the commodity strategy at Saxo Bank, anticipates oil prices to trade between $90 and $120 per barrel in the second quarter of this year.
The potential of an Iran nuclear deal, Venezuelan output increases, and, not least, a surge in U.S. shale oil production are all developments that could contribute to the uncertainty.
According to State Department spokesman Ned Price, the U.S. still believes there is a chance to resolve lingering issues with Iran in talks over its nuclear program.
The appeal of non-yielding bullion was reduced on Tuesday by increased U.S. Treasury yields and forecasts of aggressive interest rate rises by the Federal Reserve.
As of 0933 GMT, spot gold XAU= was down 0.2 percent at $1,929.43 per ounce, trading in a close range. Gold futures in the United States GCv1 fell 0.1 percent to $1,932. On Tuesday, 10-year Treasury Inflation-Protected Securities (TIPS) yields, or real yields, hit a near two-year high.
The two-year Treasury yields in the United States were near their highest since early 2019; the 10-year yields also increased. After three straight days of gains, the dollar index =USD leveled down; it received aid from safe-haven flows fueled by the likelihood of additional penalties against Russia.
Interest rates in the United States are rising; hence, the opportunity cost of storing non-yielding bullion rises. At the same time, the dollar in which the metal is valued rises. Markets anticipate the release of minutes from the Fed’s most recent policy meeting on Wednesday to determine whether the central bank will raise its benchmark overnight interest rate by 50 basis points next month to combat inflation.
Spot silver XAG= increased 0.6 percent to $24.65 per ounce, platinum XPT= decreased 0.6 percent to $980.61, and palladium XPD= increased 1.1 percent to $2,298.99 per ounce.
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