Oil prices are declining after Ukraine President Zelensky signaled he has ‘cooled down’ regarding the question of Ukraine joining NATO and as optimism grows that the economic impact of sanctions weighs on the Russian economy and that President Putin might try to avoid a long war. Adding to the earlier selling pressure was the IEA breakdown of 62.7 million barrels of emergency oil stocks. The world is working together to tackle surging oil prices, which has put a short-term top for crude.
Oil didn’t do much after the EIA crude oil inventory report showed a larger-than-expected draw, steady US production, and a tentative recovery in Russian crude imports, which will disappear as the Biden ban on Russian energy takes hold.
WTI crude is now 10% lower from the highs made at the start of the trading week, but pullback seems premature given the short-term supply disruption risk remains high. The skyrocketing move higher in oil prices has cooled. If selling pressures continue, buyers could return if there are low expectations for Ukraine and Russia to have talks that could potentially lead to a ceasefire.
Gold Drops As Risk Appetite Rises
Gold prices declined sharply as risk appetite returned to Wall Street following the first significant pullback with commodity prices since the Russian invasion of Ukraine. Coordinated efforts to tackle the global energy crisis will help ease some of the pressures we’ve seen, but the key to risk appetite will depend on how long the war in Ukraine lasts. The inflationary impact will only worsen as Russia will start to threaten withholding supplies from its large basket of commodities critical for the global economy.
Gold will remain a volatile trade and will likely pivot around the $2000 level. If US stocks continue to defend the lows made during the initial shock at the beginning of the conflict, gold can continue to edge lower. Gold may form a trading range between the $1965 and $2050 levels.