Oil extends losses on stockpile build and deteriorating demand outlook
Oil prices are under pressure for a third straight session on the back of a build in crude stockpiles and surging Covid cases in India and Japan.
After both benchmark contracts dropped 2% on Wednesday, the bears are showing they still have an appetite for further losses today. A move back below USD 60.00 for WTI is looking likely.
According to the EIA, US crude stockpiles unexpectedly rose in the week of April 16, confirming Tuesday’s API data. At the same time, Covid cases are soaring in India and Japan, the world’s third and fourth-largest consumers of oil, respectively. More states are implementing lockdowns in India, while Tokyo and Osaka are both on the brink of imposing curbs.
The outlook for oil demand is clouding again rapidly, hitting market sentiment and overshadowing Libya’s force majeure news from earlier in the week.
Attention will start turning towards the OPEC+ meeting on April 28. The oil cartel had said they would begin to increase output from May. Given the latest Covid developments and recent comments by Russia, any easing in production cuts looks increasingly unlikely so soon.
Gold could still have further to run
After two straight days of gains, the gold bulls are pausing for breath around USD1790. Gold rallied to an almost two-month high in the previous session, boosted by falling Treasury yields and equity markets.
Surging Covid cases have revived fears over the global economic recovery. These concerns have not only dragged US interest rate expectations lower, boosting demand for non-yielding gold, but have also lifted demand for safe-haven assets.
A strong US 20-year Treasury auction has meant that yields remain depressed. Given gold has been directed by interest rate expectations in recent months, the rally could still have further to run.
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