Oil drops, gold steady

Oil rises on EIA Inventory surplus

Crude prices returned to their session lows after stockpiles posted a surprise build.  The EIA reported a 2.4-million-barrel build, greater than the forecast of 2.1 million increase, and lower than the Texas snowstorm impacted prior reading of 13.8 million increase in stockpiles.

Gasoline inventories unexpectedly rose 472,000, which signals Gulf Coast refinery production has finally restarted from last month’s deep freeze.  Jet fuel demand remained steady which suggests airlines are filling seats first and will soon add more flights.  Airports are having their busiest days since March 2020 and that should only improve once more Americans get vaccinated.

US crude production was unchanged at 10.9 million bpd, while exports fell 4.3% and imports declined 5.9%.

WTI crude is slumping for a fourth consecutive day as crude stockpiles rose over half a billion barrels for the first time this year.  Last month’s deep freeze is still having lingering effects and it will take a stronger pickup in demand to reverse crude’s short-term pullback.

Gold

Gold is waiting on the Fed. The upcoming meeting is highly anticipated since it is the first one since inflation expectations have risen, sending US yields sharply higher. Fed Chair Powell will have to choose his words carefully. The Fed will triple dog dare the bond market that they won’t raise interest rates before 2023 and that should be supportive for gold prices.  Bullion investors will also want to see if rising Treasury yields due to inflation concerns will become the catalyst to kickstart a bullish move higher for gold.  It is very possible that gold will no longer be in the house of pain when Treasury yields rise.  Gold remains fixated with real yields, but as this economic recovery unfolds and markets gear up for a taper tantrum, the precious metal could start to attract steady safe-haven flows.

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