Oil turns negative, gold rebounds

Oil dips as OPEC+ fails to reach decision

The EIA crude oil inventory left me with mixed feelings.  US crude production rose 100,000 barrels a day last week, taking the total to over 11 million barrels a day, which was the first time since December.  US output is at the top of the range that has been in place since the summer and that could be worrying some OPEC+ members that they could start losing market share to the Americans.

Imports rose a strong 9.3%, while exports surged 27.9% and back above the 3 million barrel a day level.  Jet fuel demand is roaring back, and that is hardly surprising given the successful US COVID vaccine rollout (also my social media platforms that show many family and friends are making their vacation plans).  The February deep freeze is in the rearview mirror and refiners continue to make progress with the utilization rate now increasing for a fourth consecutive week to 83.9%.

Crude prices quickly turned negative after OPEC+ ministerial panel failed to reach a policy recommendation for tomorrow.  Energy traders used the hesitancy to commit to a policy decision as an excuse to lock in profits.  OPEC+ meetings always seem to go down to the wire and this should not come as a surprise.  A survey also showed that March output rose 180,000 barrels in March, with compliance rising from 121% to 124%.

Metals

President Biden’s infrastructure plan and additional wave of money growth is sending the dollar lower and both precious and base metals higher.  Commodities are the winners to Biden’s ‘Build Back Better’ plan as investments in domestic manufacturing and fixing roads, bridges and ports will drive the next commodity supercycle.

Copper consumption will enter hyperdrive and that should keep that market in a deficit for the second half of the year.

Gold is rallying after just dodging bear market territory as some investors anticipate the weaker dollar trend can’t be too far away.  Gold’s kryptonite is surging Treasury yields, but a steady climb will not derail the bullish second half of the year outlook.  Gold needs pricing pressures to grow and that will take a few months at the very least.

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