Oil outlook brighter
Crude prices are holding onto gains after OPEC+ agrees to skip Wednesday’s planned ministerial meeting. Despite the crude demand hit from India and Japan, the outlook has dramatically improved across Europe and provided an opportunity to stick to the three-month gradual increase plan made four weeks ago. Energy markets were not completely surprised with the decision to skip this week’s meeting given the Ramadan holiday. The next meeting is expected to be on May 28th.
Complicating the outlook for crude has been the disappointing news over the past month with both the J&J and AstraZeneca COVID vaccines. Today’s news that J&J’s COVID-19 vaccine has now been linked to two new cases of blood clots brings the total number of cases to 17 from around 8.1 million doses. The investigations are ongoing and initial reactions are that they will unlikely change the CDC backing of the J&J vaccination.
It was a busy day on the energy front after incremental updates on Iran’s nuclear talks and with Russian companies contemplating stopping supplies to Belarus’s Naftan Refinery following US sanctions.
WTI crude appears content to stay in its tight trading range and might have to wait for a broader move with risk appetite.
Right now, gold prices only care about the Fed. Gold is stuck despite US consumer confidence hitting a pandemic high, home prices jumping the most since 2006, and as other commodity prices surge. Gold’s next move could higher and break above the USD1,800 level if Fed Chair Powell’s upgraded outlook does not trigger a bond market selloff. Powell could very well stick to the inflation will be transitory script and that might be enough to get gold bulls excited. Wall Street has heavily priced in high inflation, so if Powell pushes back that could be enough to let gold take off.
Leading up to the FOMC decision, gold will likely continue to consolidate between the USD1770 and USD1790 range.
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