- Russia claims to be close to delivering on its promise of oil cuts in April
- Gold gets its groove back as debt ceiling concerns simmer
- Bitcoin is hovering near the bottom of the latest trading range
Oil
Crude oil prices went on a rollercoaster ride as energy traders saw a weaker demand outlook offset by some bullish supply news from both the Biden administration and Russia. Oil was lower after disappointing trade from China supported concerns that its recovery from the Covid lockdown continues to disappoint. WTI crude pared losses following reports that the Biden administration wants to replenish the SPR after maintenance is completed later this year.
Everyone knew the White House needed to replenish the SPR sooner rather than later, as reserves are at a four-decade low. It appears that the Biden administration is expecting a recession in the second half of the year, which in theory should mean that oil prices will remain high. The Biden administration originally planned to replenish the reserve when prices were around the $70 region.
Oil turned positive after reports that Russia almost met its pledge to cut production in April. Energy traders know that Saudi Arabia would do what is necessary to keep oil prices supported, the doubts are with Russia and some other countries such as the UAE. If Russia keeps these production cut promises, it can be safe to expect that they will deliver again if more cuts are needed.
Gold
Gold prices are rising ahead of a couple of major macro risks, the start of extended negotiations on the debt ceiling and ahead of an inflation report that may show the Fed may need to keep interest rates higher for longer. Gold is entering a win-win scenario as a hot inflation report will justify higher prices for an extended period that will cripple growth prospects and trigger a sell-off in the stock market. A cooling round of inflation data points could justify calls that the Fed is done tightening and supporting Fed rate cuts later in the year. Gold is trying to regain those record highs, and a host of risks could ease strong demand for safe havens in the short term.
Bitcoin
Bitcoin existed in 2011 when S&P downgraded the credit rating of the United States. At the time, nobody was paying close attention to crypto, but it is interesting to see that prices were pulled down during the summer of 2011. If market stress becomes a growing theme as debt ceiling talks continue, it will be interesting to see how Bitcoin performs. The macro backdrop has been largely unchanged over the last couple of weeks, with a lot of focus on Binance and whether people are seriously storing crypto in cold wallets.
Bitcoin appears to be stuck in a trading range, but if we have a risk-free moment on Wall Street it will be enough to send the crypto towards the mid-March lows.
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With more than 20 years of trading experience, Ed Moya is a senior market analyst at OANDA, producing up-to-date intermarket analysis, coverage of geopolitical events, central bank policy and market reactions to corporate news. His particular expertise lies across a wide range of asset classes, including currencies, commodities, fixed income, equities and cryptocurrencies. During his career, Ed has worked with some of the leading forex brokers, research teams and news departments on Wall Street, including Global Forex Trading, FX Solutions and Trading Advantage. Most recently, he worked with TradeTheNews.com, where he provided market analysis on financial data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks, including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most respected global news outlets, including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
