Oil rises on China data, gold vulnerable

Oil rises on upbeat Chinese crude import data

Oil prices are picking up for a second day, slowly clawing back some of last week’s steep losses. Upbeat data from both China and India and tension in the Middle East are supporting oil prices.

Crude imports into China jumped 21% in March, albeit from a low base the year before, as refining operations and fuel demand ramped up during pandemic recovery.

India is emerging as the latest Covid hot spot. However, rather than depressing gasoline demand, demand has surged to a four-month high as millions of people favour their car over public transport. Tighter lockdown restrictions could see this trend quickly reverse.

Looking forward, crude oil stockpiles are expected to have declined last week for a third straight week. However, gasoline inventories are expected to have risen as lockdown restrictions tightened in Europe and parts of South America.

Gold’s outlook remains bearish

Gold remains firmly out of favour for a third consecutive day as the market focuses on higher yields. Inflation expectations are very much in focus after US wholesale inflation PPI posted the largest annual gain in 9½ years in March and ahead of CPI data later today.

However, gold as an inflation hedge is playing second fiddle to the reflation theme, with markets focusing on when rates can start rising and how high they can go. Rising interest rates are negative for non-yielding gold.

As a result, gold has been under pressure for the past few months, and the outlook for the precious metal remains bearish. A weaker-than-forecast CPI read later today could offer some short-term reprieve for gold, although bears are likely to remain focused on support at USD1,716.

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