Oil rises as crude stockpiles decline
Oil prices are on the rise, breaking out of a tight trading range that has limited directional movement over the past week.
Upbeat industry stockpile data, an upwardly-revised OPEC demand forecast, a weaker US dollar, and geopolitical concerns over Iran favour oil buyers. The growing list of bullish factors is overshadowing concerns over a spike in Covid cases in Europe and tighter lockdown restrictions in the region.
API data revealed a draw of 3.6 million barrels in the week of 9 April. The supply crunch is expected to be met by higher demand amid the reopening of the US economy.
One of the most important factors underpinning oil prices has been an upwardly-revised OPEC forecast for global oil demand. Growth in 2021 to 5.95 million barrels per day is now expected, up from 5.89 million. The upward revision comes just weeks ahead of when OPEC is expected to start increasing output levels, which is likely to keep any gains in oil capped.
Gold’s gains lack conviction
Gold is extending gains for a second straight session following Tuesday’s inflation data and the J&J vaccine shock, although today’s move lacks conviction.
News that US medical authorities have recommended a pause in the use of the Johnson & Johnson single-shot Covid vaccine lifted demand for safe-haven gold in the previous session, and we are seeing some follow-through buying today. The pause is expected to last a few days, but the market is taking this in its stride for now. However, should the FDA and CDCP come out with a stronger statement, then we could see market sentiment take a harder hit, which could be supportive of the safe-haven gold.
Meanwhile, the weaker US dollar and depressed Treasury yields are underpinning the dollar-denominated, non-yielding gold. Although, strength in the equity markets is keeping the upside limited.
Attention will now turn towards Jerome Powell, who is expected to speak at the Economic Club in Washington later in the day. More soothing words from the Fed Chair could keep treasury yields low and gold around the USD1,750 level.
