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Energy Prices Remain Strong as Most Commodities Weaken on Debt Deal, Fed Skip

Published 05/25/2023, 12:56 AM
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  • EIA Report: Inventories fall by 12.46 million barrels vs 932K expected build
  • Gold struggles as sticky inflation could support Fed skip
  • Global crypto market cap falls to $1.1 trillion
  • Oil

    Oil is starting to turn bullish as demand shows signs of improvement also, while energy traders heed the Saudi warning given to short-sellers. The EIA crude oil inventory was mostly bullish as demand improved across crude, distillates and gasoline.

    Crude has been dragged down as debt ceiling talks are still hung up on spending, but the supply and demand side drivers are slowly turning bullish here. WTI crude would be so much higher if we weren’t entering that stressful period of time that we wait for the 11th hour for a debt limit deal to get done. With the X-date likely moving back to the end of the first week of June, we could see oil struggle to make a meaningful rebound here.

    Gold

    Gold is weakening as the dollar rallies as debt ceiling progress appears to be nonexistent, and as the risk of more Fed tightening remains. Short-dated Treasury yields are surging and that has dominated today’s price action. Gold has key support at the $1975 region, but if that breaks, it could get ugly. Gold should still be a safe-haven trade, but it will struggle if sticky inflation forces the Fed to deliver more tightening.

    Crypto

    Bitcoin is under pressure as the risk of a US default grows, and the Fed could be in a position to deliver more tightening. Bitcoin is going to be very sensitive to surging Treasury yields as too many crypto/blockchain companies will struggle with financing. It is hard enough to find a bank that will deal in cryptos, let alone take out loans for long-term projects. Bitcoin remains rangebound and should continue to consolidate near the lower boundaries of its downward sloping trading range, with the $25,000 level providing massive support.

    BTC/USD Daily Chart

    Original Post

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