Oil steady, gold bottom in place

Crude prices have been all over the place today.  Oil initially gave up earlier gains after Russian Deputy Prime Minister Novak gave some comments that reminded energy traders that Russia is focused on market share and doesn’t need oil prices to be much higher.  Novak told President Putin that the OPEC+ agreement is positive for Russia and that the output hike will reach 890k bpd in April when compared to last May.  Novak also noted that the National Wellbeing Fund will receive 2.5 trillion rubles if oil averages USD60/bbl in 2021.

The EIA crude oil inventory report showed another large build with stockpiles, but also that refineries are now finally resuming operations. Last night’s API inventory report also posted a massive build so that is probably why oil prices didn’t have a knee-jerk selloff reaction.  Refiners posted a record 2.4 million bpd increase in oil processing, which brings the total to 12.3 million, which is much closer to the pre-deep freeze levels of 14.8 million.

US production rose 900,000 bpd to 10.9 million and expectations will be high for that number to continue to grow now that OPEC+ has signaled they will keep output mostly steady.  Exports also increased by 12.0% raising expectations that the demand outlook is starting to improve globally.

WTI crude seems poised to stabilize around the mid-$60s as long as virus variants don’t pose a greater risk to the short-term outlook.

Gold prices vulnerable to US yield moves

Gold prices pared earlier losses after today’s CPI data lessened worries about near-term inflation.  Gold will eventually return to being an inflation hedge, but right now pricing pressures are dominating the move in Treasury yields.  Gold should continue rebounding if Treasury yields stabilize.  The next round of US Treasury auctions could be key in determining the next big move for gold.  Strong demand for Treasuries should keep yields in check and that could allow gold to push higher.

Gold tested with bear-market territory earlier this week and that discount was too good of an opportunity for many longer-term traders. Gold may have formed a key bottom and investors could quickly jump back on this trade if the USD1700 level is strongly respected this week.

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