Oil slumps on SPR report, gold consolidates

Oil slides as IEA steps in amid OPEC+ inaction

Oil prices are falling heavily on the back of reports the US is poised to announce a substantial draw on the SPR. The withdrawal dwarfs previous moves by the administration, equating to one million barrels per day and 180 million overall, around a third of total reserves. If coordinated alongside other countries, it could be much larger again.

At a time of extreme tightness in the oil market, when Russian exports are being disrupted as a result of Western sanctions, the move is very welcome. And the timing is, I’m sure, no coincidence either coming in the months leading up to the midterms later this year as Biden seeks to protect his slim majorities in Congress. It may be too late for that though.

The move is arguably necessary as well, given the reluctance of the apparently apolitical OPEC+ to free up further supply to ease pressures in the market. The group is widely expected to stick to plans to only increase by 400,000 barrels per day in May, before no doubt missing those targets by a wide margin, leaving certain members perfectly able and entirely unwilling to fill the shortfall. And an IEA-led reserve release may only solidify their position, shortly after OPEC+ ditched the organisation as a data source in what I’m sure is another non-political move.

Gold consolidation continues

Gold prices are slipping a little but continue to trade around the middle of the range they’ve remained within for the last couple of weeks. The yellow metal has found strong support around USD 1,900, with USD 1,960 capping any upside late last week and early this. A relatively tight range by recent standards at a time of immense uncertainty, high inflation and very hawkish central banks. I can’t imagine support for gold is evaporating any time soon although the upside may be limited for now.

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

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam