Oil pares gain after pipeline unveils timeline to restore service, gold steady

Crude rally eases as Colonial Pipeline to resume service 

Crude prices were slightly higher after the Colonial Pipeline remained closed for a third day following a cyber-attack.  Energy markets didn’t bite that this would be a prolonged delay as the spike higher with oil prices was limited, despite the attack impacting the largest oil-products pipeline in the US.  A criminal group known as Dark Side was responsible for the attack that impacted gasoline that travels from Texas to New York City.  Cybereason reported that DarkSide claims they did not want to cause problems for society and that led some to believe a follow-up attack seemed less likely.

The rally in oil prices was short-lived as the Colonial Pipeline disruption seems it will not have a prolonged impact and as WTI returned to contango.  Also weighing on crude prices was the WHO’s reclassification of the highly contagious triple-mutant Covid variant spreading in India as a “variant of concern.”  A key component of the bullish thesis for oil prices in the second half of the year is for emerging markets to have COVID-19 under control and for international travel to resume.

WTI crude looks like it could be poised to trade between the USD60-70 range over the next couple of months.

Gold

Gold prices continue to hover near three-month highs as investors digest a wrath of Fed speak that has yet to budge the needle over when to start talking about tapering asset purchases.  We’ve heard a lot from Fed’s Kaplan recently and his continued beating of the drum that it will be healthy to begin discussions on tapering sooner rather than later as we approach substantial progress.  The Fed’s Evans noted that the disappointing jobs number will be a “one-month thing”, a sign that we could see some range trading over the next few weeks.

Inflationary concerns will dominate the focus this week, but the base effects are widely priced in and this upcoming reading will likely only serve as a baseline.  Gold prices seem content consolidating, but the next move still seems like it will be higher.  Last week’s price action from the disappointing employment report triggered a short-covering move, but also a greenlight for many bullion investors to jump back now that Wall Street is starting to believe the Fed will stay ultra-accommodative a lot longer.  Gold has tentative resistance from the USD1857 level, with further upside likely eyeing a move towards the USD1,950 level.

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