Oil wavers, gold respects USD 1800

Oil prices under pressure

Crude prices are wavering as Western Europe passes peak COVID but the situation across Asia remains concerning.  A slightly stronger dollar seems to be temporary and will probably only contribute to modest pressure with oil prices.

Energy markets are struggling to get a firm grasp on when international travel will resume and provide the last major missing component to the demand outlook.  American Airlines noted that international demand is anemic and not expected to perk up soon.  Southwest Airlines stated corporate traffic continues to “significantly lag”.  Alaska Air anticipates second-quarter capacity to drop 20% from 2019 levels.  Domestic flights in the US will pick up and many Americans will travel closely for summer vacations, but that might not overcome the remaining hole for jet fuel demand.  It might be a few more months before international travel shows some signs of life and that could mean oil prices will consolidate a while longer.

Crude prices could continue to struggle for direction now that OPEC+ is going forward with their April 28^th ministerial meeting.  The short-term outlook still has some holes and that may force OPEC to adjust their increases with production.

Gold

Gold prices slumped after mostly upbeat US economic data diminished safe-haven asset appeal and after failing to break above the USD1,800 level.  The US outlook continues to look good following another pandemic low with weekly jobless claims, two better-than-expected Fed regional surveys (Chicago and Kansas City), a strong improvement with the Leading index, and despite soft housing data, which was somewhat expected.  The housing market has been the bright spot of the economy and was ripe to ease given the appeal for going back to big cities, higher mortgage rates, tighter lending conditions, and seasonality.

Gold’s outlook is still very bullish as central bank demand remains strong and now that India and China are showing stronger physical demand for bullion.  It just seems like a matter of time before gold will break above the USD1,800 level.

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