Oil snaps 4-day winning steak
After 4 straight days of gains oil is moving lower on Thursday. The escalating covid crisis in India, coupled with a lower than expected draw in crude oil inventories are overshadowing the International Energy Agency’s view that demand is outpacing supply.
The IEA’s report followed along the same thread as the OPEC report released earlier in the week, pointing to strong demand across the year thanks to solid economic growth in US and China, so to a degree has been priced in.
The EIA crude oil inventory data revealed a draw of 427,000 barrels, much smaller than the 2.817 million barrel draw forecast. This was also significantly down from the previous week when an almost 8 million barrel draw was recorded.
Meanwhile, Covid cases in India remain elevated which is affecting fuel consumption in the region. Fuel consumption, which is considered a proxy for oil demand fell 9.4% in April compared to March. The number highlights the impact that the Covid crisis and associated mobility restrictions are having on oil demand in the world’s third-largest importer of oil.
Whilst the broad trend for oil remains bullish, the price will likely struggle to advance much further whilst Covid continues to ravage India.
Gold extends losses
After experiencing its worst 1-day selloff in two and a half months in the previous session, the precious metal continues to lose ground today. Rising treasury yields and a stronger US dollar are not conducive to gains in non-yielding, US dollar-denominated gold. That said, the pace of the selloff has slowed significantly.
All eyes will be on PPI data and the Fed speakers, who may be able to offer some support to the precious metal. As we saw from Fed speakers Richard Clarida and Raphael Bostic yesterday, the Fed remains dovish, suggesting a stronger focus on the jobs market than inflation right now at the central bank.
