Oil claws higher, gold rises

Oil – recovers from oversold territory

After crashing over 6% lower in the previous session, oil prices are on the rise clawing back some of those losses. Bargain hunters were out in force in early trade picking oil prices up off its 6-week low. Both benchmarks, WTI crude and Brent, have fallen around 14% from recent highs putting them firmly in correction territory.

Concerns over rising Covid cases and tighter lockdown restrictions in Europe panicked the oil markets, which combined with front month spreads falling into a small contango resulted in yesterday’s deep selloff.

Whilst there is a sense that the selloff was overdone, taking oil well into oversold territory, lingering concerns over the Covid picture in Europe could keep the price depressed, with WTI under USD60. After some consolidation around these levels, another leg lower isn’t out of the picture, particularly if any travel restrictions look set to continue well into the summer months.

Adding to oil’s woes, crude stocks rose by 2.9 million barrels against an expected decline of 300,000 barrels. Attention will now turn to the EIA stockpiles data due today.

On the flip side, one saving grace for oil is that recent weakness in the price supports a more cautious approach from OPEC+, boosting the likelihood of production cuts being rolled over.

It is also worth keeping an eye on the trouble in the Suez Canal, amid an accidental blockage in one of the busiest maritime trade routes which potentially impacting the movement of oil.

Gold looks to Capitol Hill for further impetus

Gold is on the rise, retracing losses in the previous session. On Tuesday, Fed Chair Jerome Powell continued to talk down the prospect of a sustained move higher in inflation, insisting that any spike would be temporary. For inflation hedge gold, the comments were unsupportive, sending the precious metal 0.7% lower despite a broad risk-off sentiment.

With rising Covid cases in Europe unnerving the global financial markets, gold is rising on safe-haven inflows. However, the great inflation debate is set to continue later today as Jerome Powell & Janet Yellen testify before Congress for a second day, which could provide fresh direction.

For a look at all of today’s economic events, please check out our economic calendar at www.marketpulse.com/economic-events/

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.