Oil extends losses on demand concerns
Oil is selling off for a second consecutive day, having experienced its largest daily drop in two weeks in the previous session.
An anti-trust suit on OPEC output cuts, surging Covid cases in India and an unexpected gain in crude stockpiles are keeping oil prices under pressure.
As Covid cases continue to surge in India, the world’s third-largest importer of crude, concerns over the demand outlook are understandably increasing. The ferocious wave engulfing India needs to be brought under control in order for oil prices to make any meaningful recovery.
In addition to demand concerns, the move lower in oil was exacerbated by reports that the US House Judiciary Committee has passed a bill that could leave OPEC open to anti-trust lawsuits over production cuts. Effectively, the bill would make it illegal for any foreign state to act collectively to limit oil output or set oil prices. Given that OPEC regularly partakes in such activities, investors have been shaken. However, the chances of such a bill being signed into law are minimal. Similar attempts have been made on several occasions over the past few decades, always in vain.
The American Petroleum Institute reported a surprise build in inventories of 0.436 million barrels of oil, sharply up from a draw of 3.608 million the week before. This does not bode well for the closely-watched official EIA inventory data later today.
Gold looks to treasury yields amid light economic calendar
Gold gained ground in the previous session on falling US Treasury yields while receiving a boost from safe-haven flows. Today, the slight uptick in US treasury yields and improved sentiment in the equity market sees gold prices giving up earlier gains.
With little in the way of high-impacting macro data to drive gold, investors will be watching US treasury yields for further impetus.
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