Oil slumps as ship freed, gold falls

Oil slips on Suez opening, Covid

Ever Given is afloat and Egypt’s Suez Canal appears poised to be reopened.  A backlog of a few hundreds of ships will take weeks to normalize and the financial impact will be felt for months.  With 12% of the world’s seaborne trade now set to reopen, crude prices turned negative as supply disruption risks have faded.

Adding to the short-term woes for the crude demand outlook is that global Covid cases have risen for a fifth straight week.  US Covid cases are increasing but a successful vaccine rollout makes it seem less likely a fourth wave will happen.  The next few weeks will be tough for Europe, but new measures and improved vaccine execution should lead to a much more optimistic outlook in May.

Oil prices will likely consolidate until the pivotal OPEC+ meeting on output.  A consensus was building that OPEC+ would easily agree to keep production steady, but now that the colossal container ship is set free that might change.  Despite the surge in global cases, US and Asia demand should be healthy and strong.  Each monthly meeting on output will grow harder and calls for the unwinding of production cuts will grow.

WTI crude prices should consolidate leading up to the OPEC+ meeting but could settle lower if the strong dollar trend continues.

 

Gold under pressure

Gold prices tumbled at the open as investors wrote-off the forced liquidation of more than USD20 billion in holdings linked to Archegos Capital Management as not a systemic risk and not the end of the current cycle.  Investors are not abandoning stocks and going into safe-havens, and when you add in that Treasury yields are rising again, gold doesn’t stand a chance.

Gold’s consolidation is breaking and if downward pressure takes prices below the USD1700 level, it could get ugly fast.  Massive support throughout the pandemic has been the USD1670 level and if that doesn’t hold, not much support is seen until the USD1600 level.

This article 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 Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya