Oil market remains tight
Crude prices initially shrugged off a mostly bearish EIA crude oil inventory report. Shortly after the weekly oil report release, the Russian Energy ministry noted refiners continue to struggle to have minimal crude capacity offline. The oil market remains very tight and despite the EIA’s surprise build with crude oil inventories and greater than expected gasoline build, crude prices are poised to head higher.
The EIA report showed US production remained steady at 11.7 million barrels a day. The headline build of 515,000 barrels per day was the first increase in eight weeks, a big miss of the expected 1.3 million draw. Jet fuel inventories remain close to record lows. Omicron was a drag on gasoline exports, sending them to the lowest levels since June 2020. Demand is moderating, but seasonal factors are at play.
Brent crude was fifty cents shy of the USD 90 level and that might hold unless a fresh catalyst emerges. Oil prices are widely expected to head higher, but catalysts will be needed to break past key psychological levels.
Gold is slowly getting its groove back as Treasury yields continue to edge lower from recent highs. Gold didn’t do much today as safe-haven demand was light as stocks bounced back. Softer jobless claims and existing homes sales data helped rates drift lower, but the focus today was mostly on a wrath of strong earnings results.
A big wild card for gold is what will happen with Russia-Ukraine tensions, but the risks are growing and a small-scale attack could happen. Geopolitical risks and surging global inflation should keep on providing gold underlying support going forward. Gold’s next upside target includes the USD 1880 level, followed by the psychological USD 1,900 level.
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