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Oil Slide Tests Producer Earnings as OPEC+ Adds Supply
OPEC+ supply increase and Hormuz recovery drove oil below $69, testing producer earnings. Gold fell 0.8% on dollar strength. Fed minutes and ISM services this week.
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Oil slid below $69 a barrel on Monday after seven OPEC+ members agreed to increase quotas by 188,000 barrels a day next month. The move came as shipping through a US-protected corridor in the Strait of Hormuz showed signs of recovery, reducing the risk premium built into crude since early June.
For oil producers, the price drop tests the earnings outlook after a quarter where supply disruptions had boosted margins. Brent crude settled at $71.82 a barrel, a level that approaches the marginal cost of production for some U.S. shale operators, according to recent earnings calls. If the downward trend persists, second-quarter reports due in coming weeks could show margin compression.
Gold fell 0.8% and silver dropped 0.7% as the dollar firmed against most G10 peers. The Bloomberg Dollar Spot Index rose 0.2%. Higher real yields and a stronger dollar typically weigh on non-yielding assets like gold, and the metal's decline reflected that correlation. A modest bid in Treasuries pushed the 10-year yield down 2 basis points to 4.46%, a level that still keeps pressure on gold.