Price action in the oil market; Gold sets a new record

Despite the Energy Information Administration reporting relatively significant drops in both US crude oil and refined product stockpiles, price movement in the oil market was rather modest yesterday. Over the course of the week, US commercial crude oil stockpiles decreased by 3.74MM barrels. However, this was a little lower than the 4.3MMbbls the API recorded the day before. Additionally, Cushing’s crude oil inventories decreased by 970Mbbls, marking the fifth week in a row that they have decreased at the WTI delivery hub.

Although arguably a very narrow contango, the prompt WTI time spread still trades in contango despite this narrowing. Gasoline and distillate stockpiles fell by 4.12MMbbls and 3.63MMbbls, respectively, in the refined product category. Both of these goods’ inventories are at their lowest points for this time of year since 2014.

Over the course of the week, implied demand statistics were also fairly robust. Compared to a 5-year average of roughly 8.5MMbbls/d, gasoline demand increased by 150Mbbls/d to an average of 9.3MMbbls/d; however, the 5-year average is significantly skewed because of the Covid demand hit seen in 2020. The EIA report was positive for the market overall.

Metals: Gold reaches its peak

It should come as no surprise that Saudi Arabia increased its official selling price (OSP) for all of its crude oil grades entering Asia in May. These hikes follow sudden supply cuts announced by Saudi Arabia and a few other OPEC+ members last weekend, which stunned the market.

Arab Light into Asia saw a US$0.30/bbl increase to US$2.80/bbl over the benchmark; this is the third month in a row that the OSP has increased as a result of China experiencing a rebound in demand after abandoning its zero-COVID policy. While prices for Europe and the Mediterranean were held unchanged MoM, OSPs for all grades entering the US were also raised for May.

After US statistics revealed the employment market is loosening, fueling hopes that the Fed is drawing to a close in its monetary tightening cycle, spot gold closed above the US$2,000/oz barrier this week for the first time since March 2022. Due to the banking industry’s worries, the demand for safe-haven assets has surged over the past month, which has benefited gold. Markets will be closely watching this week’s US jobs data to see whether it will push gold prices near to their record high of US$2,075.47/oz set in August 2020.

The NDRC has warned futures companies not to exaggerate price movements in the iron ore market, leading to a 6% fall in prices so far this week. To preserve the market’s regular order, the NDRC will monitor it closely and step up its regulatory monitoring.