Oil slips as fuel demand disappoints
Oil prices are edging lower as the start of the US summer driving season has failed to live up to the hype. EIA stockpile data in the US, the world’s largest oil consumer, revealed a softer-than-expected fuel demand in the US at the start of the key summer period.
Oil stockpiles fell for an 11th straight week, which is an encouraging sign. However, fuel inventories rose sharply owing to weak consumer demand.
The oil market has been hopeful of a strong US driving season to boost demand. So far, the data suggests otherwise. Even so, traffic levels are rising, and the vaccine programme continues at a rapid pace, which bodes well for the outlook.
The uptrend for oil remains intact, but the data has served to rein the bulls in and remind us that the road to recovery isn’t linear.
Gold eyes CPI for next move
Gold prices are falling lower for a third straight session after briefly pushing over USD1900 at the start of the week. The precious metal trades around its weekly low as nerves creep in ahead of the ECB rate decision and US CPI data. These key events will shed some light on the pace of the global economic recovery and central bank policymaker’s stance towards stimulus.
A stronger-than-forecast rise in CPI could boost bets that the Fed will rein in support sooner, which could be negative for non-yielding gold.
All eyes are now on the ECB. The central bank is not expected to move on interest rates, and the PEPP is expected to remain at EUR 1.85 trillion.
Just a fortnight ago, ECB President Christine Lagarde said it was too early to talk tapering support. The markets will be keen to see signs that the ECB is willing to keep the stimulus taps turned on.
Technically the picture for gold is bearish. Having breached support at USD1880, sellers could look to target USD1856, the 4 June low.
