Oil rises as China eases Covid rules
Crude prices rallied after China reduced the quarantine time for inbound visitors and as Beijing and Shanghai declared zero COVID cases for the first time in months. China is showing they realize they can’t keep their strict COVID controls. Earlier, Chinese authorities triggered some alarm after noting that the zero-COVID policy could be in place for the next five years. The crude demand outlook is getting a major boost after China cut the mandatory isolation time in half to seven days.
The easing of China’s quarantine times could support the idea that Beijing might be getting closer to pivoting away from its zero-COVID policy, but that shift probably can’t happen till closer to the end of the year.
Earlier oil edged higher over expectations Libya would not be able reliably export crude as protests spread and as risk appetite returned to Wall Street.
The supply side of the oil equation should remain supportive for prices even if OPEC+ sees the Saudis deliver a little more crude to help cover the shortfall from Nigeria and Angola. President Biden’s July trip to Saudi Arabia is mostly for political theater and won’t really lead to a meaningful increase beyond the planned OPEC+ boost of 648K b/d of supply in July and August.
Gold is struggling for direction today as risk appetite returns to Wall Street as global bond yields rise. Fixed income has been under pressure after ECB’s Lagarde affirmed they are poised to raise rates by 25 bps in July while they can kick off their new bond-purchasing operation. The G7 actions against Russia aren’t hard hitting as they won’t see involvement from China.
Gold seems like it will struggle until the peak inflation question is answered. If Treasury yields can retest the earlier highs seen this month, gold might be vulnerable to one last test sub-USD 1800 before the bullish bets return.
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.