By Barani Krishnan
Investing.com - Another week and another 2019 high for Brent amid supportive U.S. oil data that ironed out some global growth worry.
Yet, the real story in oil may not emerge for another two weeks – until the Trump administration reveals whether it is renewing sanction waivers for importers of Iranian oil and by how much.
Pressure from Washington is building on Saudi Arabia to announce a suspension or ease in OPEC production cuts that has jacked up U.S. crude prices by more than 40% this year, and led to an even more astonishing jump of nearly 60% in gasoline futures. Analysts say the more concession the Saudis make on production cuts, the less inclined President Trump will be to renew sanction waivers when the decision on Iran comes May 2.
With gold, scattered spots of weakness in the global economy helped fetch bids at around the $1,275 support level, though recapturing $1,300 will require a lot more risk aversion.
Energy Review
Oil bulls spent the week demonstrating they had no intent letting the market’s momentum slide, emerging at session lows to buy the dips.
Yet, pushing for new meaningful highs required data pointing to better demand or a more supportive economy. And that seemed to elude them after more than three months of relying just on OPEC cuts or unplanned shortages in Venezuela, Iran and, now, Libya.
And then, there is the question of Russia’s commitment to OPEC production cuts beyond June. Moscow has resorted to mixed messaging on its future with the cartel, with some business leaders expressing worry that Russia will lose market share to the United States if the cuts were to continue. Russian oligarchs like sovereign wealth fund chief Kirill Dmitriev and oil giant Rosneft’s head Igor Sechin are openly pushing for more oil production to foster healthy competition.
Yet, President Vladimir Putin, Russia’s ultimate dealmaker, continues to assure Saudi Arabia and its Crown Prince Mohamed bin Salman, to whom he has become an indispensable ally, that the Kremlin will do whatever it takes to support Riyadh and global oil prices.
But the Saudis may be in a tougher spot. Reuters oil columnist John Kemp said high-level discussions between Riyadh and Washington over Iranian sanctions and production policy were likely to have begun already. Trump spoke on the telephone earlier this month with the Saudi Crown Prince, who needs the U.S. president’s support as much as Putin’s to ensure the sustainability of Gulf peace and Riyadh’s dominant role in the region.
Amid such high-stakes oil politics, weekly U.S. data from the Energy Information Administration indicated that demand for the black stuff may be stabilizing after all.
The EIA said U.S. crude stockpiles fell by 1.4 million barrels last week, a tad higher than the 1.2 million-barrel drop forecast by the market. It was the first crude inventory decline in four weeks and came after non-stop builds totaling 17 million barrels.
While the draw wasn't spectacular, it could put to rest some of the uncertainty that has dogged the market over the past few weeks and help oil longs make a fresh bid for $65 WTI -- a target much talked about by bulls and but one they have found elusive so far.
Refinery runs also picked up, running at 86.4% of capacity versus the previous week's 87.7%, in a sign that gasoline-making was intensifying ahead of the peak U.S. summer driving season.
For the week, the U.S. West Texas Intermediate was up 0.8% while Brent rose 1.7%. Year to date, the U.S. benchmark showed a gain of 41% against a 34% rise for its U.K. peer. Brent also hit a 2019 high of $ 72.27 per barrel.
Energy Calendar Ahead
Tuesday, April 23
American Petroleum Institute weekly report on oil stockpiles.
Wednesday, April 24
The EIA weekly report on oil stockpiles.
Thursday, April 25
EIA Weekly natural gas report
Friday, April 26
Baker Hughes weekly rig count.
Precious Metals Review
The roof didn’t fall on China last week, not in the way gold bugs hoped. But neither did the Dollar Index reach towering heights, so the yellow metal lived on for another week.
Bullion and gold futures had a range-bound trading week at around the $1,270 support after hitting 2019 lows. Analysts say the precious metal has as much chance of recovering in coming days as continuing with its recent rut due to mixed fundamentals.
Some see gold breaking down to below $1,200, as investors return to risk-on mode from the rally on Wall Street, upbeat Chinese economic data and improved consumer sentiment in Germany.
Others, like London-based Capital Economics, predict $1,400 for gold before the end of 2019, saying risk aversion will return to global markets and spur safe-haven demand in North American and European gold ETFs.
Spot gold, reflective of trades in bullion, ended the week down 1.2% after a 2019 low of $1,271.35
Gold futures for June delivery, traded on the Comex division of the New York Mercantile Exchange, finished the week down 1.5% after a four-month low at 1,270.10.
Barring the weak fundamentals for gold, there was crimped activity ahead of the Good Friday holiday.
Precious Metals Calendar Ahead
Tuesday, April 23
U.S. House Price Index (MoM) (Feb)
USD Services PMI (Apr)
U.S. New Home Sales (MoM) (Mar)
U.S. Richmond Manufacturing Index (Apr)
Eurozone Consumer Confidence (Apr)
Wednesday, April 24
BoJ Monetary Policy Statement
Thursday, April 25
U.S. Durable Goods Orders (MoM) (Mar)
U.S. Initial Jobless Claims
Friday, April 26
U.S. GDP (QoQ) (Q1)
U.S. Real Consumer Spending (Q1)
U.S. Michigan Consumer Sentiment (Apr)