Oil pops after US signals SPR refill could begin in June

• Oil pares losses after Energy Secretary Granholm says oil purchases for SPR could begin in June
• Gold lower on stronger dollar
• Crypto struggles as Wall Street prepares for market stress from debt ceiling drama

Oil

Oil were heavy after another round of Chinese data, this time money metrics, confirmed their economic reopening from COVID continues to disappoint.  Energy traders are somewhat shrugging off the latest OPEC monthly report that contained a slight upgrade with Chinese oil demand.  China is now expected to require 800,000 bpd, up from the 760,000-bpd seen last month.

Debt ceiling drama will eventually play a larger driver for oil prices, but right now whatever downside we are seeing with prices appears to be limited.  Oil looks like it is ready to consolidate here. A lot of the bad news has been priced in so fresh monthly lows seem unlikely.

Oil pared losses after Energy Secretary Granholm signaled oil purchases for the SPR could begin in June.  Everyone knew the US would have to begin purchases before the end of the year, but the June timeline seems a bit ahead of schedule.  With oil near the levels that the Biden administration was eyeing, it makes perfect sense for the US to fill up well in advance of winter.

Gold

Despite a selloff on Wall Street and tumbling bond yields, gold prices are falling.  It appears that the journey back to record highs will be a lot harder for bullion.

Today’s weakness for gold is a head scratcher.  Fed rate cut bets have increased, banking jitters returned for PacWest, and as another round of data confirms that the Fed is likely done hiking.

Gold’s weakness could be attributed to optimism that global recessionary fears are seeming less likely.  Today, the BOE delivered the largest upward revision to GDP in MPC history. The outlook has improved dramatically for Europe as the eurozone is no longer expected to have a deep recession.  There might be too much optimism now that the peak in rates is in sight and that might make life difficult for higher gold prices.  Gold bulls need to see a fresh catalyst that triggers market stress.

Bitcoin

Bitcoin is lower as risk aversion runs wild on Wall Street.  The return of some banking jitters to PacWest was unable to trigger strong demand for cryptos this time. Banking contagion fears still remain low as some banks like Western Alliance show deposits are rising.

SEC Commissioner Hester Pierce supported the US taking notes over the crypto regulation set forth in Europe.  Pierce said, “I think we’re shooting ourselves in the foot by not having a regulatory regime in the US.”  Bitcoin will likely stay in a trading range as crypto traders remain in wait-and-see mode over what will happen on the regulatory front.

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