Oil extends gains on a strong demand outlook
Oil prices are charging higher for a third consecutive session on fuel demand optimism. The oil market is looking through the Covid crisis in India, focusing instead on better-than-expected US crude inventories and the ramping up of refining activity. The oil markets see the light at the end of the Covid tunnel.
US crude inventories rose by 90,000 barrels last week when expectations had been for a 659,000 barrel build. Meanwhile, distillate stockpiles, including diesel, fell by 3.3 million barrels, yet refining activity rose to 85.4% of capacity.
Optimism surrounding the improving demand outlook is overshadowing the OPEC+ decision to stay on track to raise production levels. Goldman Sachs’ forecasts of oil at USD80 is just adding fuel to the fire. WTI is on track to gain over 3% so far this week.
Gold eases as yields rise
The rebounding US dollar and rising treasury yields are once again raining on gold’s parade. The precious metal had enjoyed a 0.47% rally in the previous session as the greenback dropped to a nine-week low.
While the Fed insisted any increase in inflation would be temporary, yields are advancing as recovery and inflation expectations tick higher. Rising yields are adding bearish pressure to the precious metal.
Joe Biden declared that a corner had been turned on the pandemic as he laid out a broad vision for the country’s recovery. This included eye-watering levels of spending, partly funded by higher taxes on America’s most wealthy.
US first-quarter GDP data posted a healthy gain of 6.4% on an annualised basis in the first three months of the year. This was just shy of the 6.5% forecast and up from 4.3% for the fourth quarter in 2020.
Attention will now shift to US treasury yields and US dollar price dynamics to provide direction to gold.