Oil extends losses for a fifth straight session
Bearish pressure on oil is showing no signs of letting up as oil prices trend lower for a fifth straight session. The price of oil has picked up off session lows, but against a backdrop of another increase in oil inventories, ongoing concerns over Covid and a stronger US dollar, the bulls are likely to struggle to take control.
The latest EIA data revealed that crude inventories rose for a fourth straight week as refineries were forced to close owing to a cold snap. Inventories rose by 2.4 million barrels last week, disappointing the market. After the API Crude Inventory report on Tuesday estimated a 1 million barrel draw, hopes had been running high that the impact of the cold snap had worked its way through the system. This was not the case.
The demand picture for oil remains cloudy, particularly with the deceleration in vaccine rollouts across Europe. The prospect of tougher lockdown restrictions in France and Italy highlights the challenges countries are still facing in controlling the virus, and the difficult economic conditions in Europe has weighed on the demand for crude.
Gold pressurised by rising yields
Gold shot higher post-Fed, hitting a two-week high of USD1,755, but has been unable to maintain the level. While the Fed’s accommodative stance weakened the US dollar and offered support to gold yesterday, sellers are once again in the driving seat. At the same time, gold continues to show resilience in the face of previously bearish factors in the shape of US yields and dollar strength.
Yields on the benchmark 10-year treasury have surged to 1.72% today, the highest level since January last year. As a result, non-yielding dollar-denominated gold is struggling to find demand. Support can be seen at 1730; a break-through at this level would reaffirm the negative outlook for the precious metal.
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