Oil prices remain a volatile trade as the crude demand outlook grows more uncertain as inflation remains uncomfortably high and has accelerated global growth concerns. The risk-off tone on Wall Street is leading to a much stronger US dollar which is weighing on oil prices. Many energy traders remain fixated over the EU’s potential ban on Russian crude, which now seems to be losing momentum. The EU is struggling to get Hungary’s support, which could suggest this embargo won’t happen anytime soon.
Earlier oil was supported after the EIA noted that there is currently almost a universal product shortage and that they are prepared to release more oil stocks if needed. In this market environment, oil will struggle if China moves forward with city-wide lockdowns. Despite all the fears of weakening growth prospects, oil markets should be supported by a strong summer vacationing seasoning that will see lots of driving, flying, and cruise ship trips.
The dollar has firmly put gold in the danger zone and a break of the USD 1800 level could lead to further technical selling. Gold can’t attract any attention until this move in the dollar ends. Right now, Treasury yields and the stock market are both declining, which should suggest we are getting close to capitulation with this de-risking moment on Wall Street. If gold breaks below the USD 1800 level, technical selling could support a drop towards USD 1750.
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