Oil softer, gold bottom may be in place

Oil

Crude prices are headed lower for a third consecutive day on supply concerns and after major European nations suspend use of the AstraZeneca vaccine.   Many energy traders are also focusing on growing Iranian oil exports into China.  Iran is exempt from supply restrictions and could be taking away sales from other OPEC countries, like Angola.  Reports that Angola’s preliminary plan will include a reduction of oil exports to 1.05 million bpd in May could be a sign that demand outlook is waning.

Europe’s vaccine rollout is taking a big hit now that Germany, France, Italy, and Spain suspended use of AstraZeneca’s COVID-19 vaccine and that should diminish the crude demand outlook in the short-term.  AstraZeneca has noted a careful review of all available safety data of more than 17 million people vaccinated in the European Union (EU) and UK with the COVID-19 vaccine has shown no evidence of an increased risk of pulmonary embolism, deep vein thrombosis (DVT) or thrombocytopenia, in any defined age group, gender, batch or in any particular country.

Thailand has resumed use of the AstraZeneca vaccine, while Australia announced it does not intend to stop using it.  A key EMA review on Thursday could greenlight the vaccine for much of Europe, but concerns are growing that many will remain hesitant for that particular vaccine.

The European pause in vaccine rollout will likely be temporary but remains disruptive to the crude demand short-term forecast.

WTI crude looks like it will stay trapped in its mid-USD60s cage.

Gold showing signs of stability

Gold buying is starting to stabilize now that a majority of fund managers believe US stocks are at the late-stage of the bull market.  Gold could eventually resume its role as inflation hedge if rising Treasury yields primarily lead to a stock market selloff due to taper tantrum concerns.

For gold to turn bullish, the Fed needs to stick to ultra-dovish script and push back on the bond market.  Skyrocketing Treasury yields will eventually disrupt the economic recovery and the Fed needs to be more vocal about how much they will tolerate.  The Fed needs to signal at what level they are comfortable with inflation overshooting to and for how long.

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