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Energy & Precious Metals - Weekly Review and Calendar Ahead
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By Barani Krishnan

Investing.com - The Memorial Day weekend is here, bringing the crude market to its most anticipated demand period of the year.

But will that be enough to save the day for oil bulls?

Last week was testimony of the multiple countervailing themes at work in oil, as the market experienced its worst weekly loss for the year. Just a week ago, crude futures set 2019 highs on tensions ratcheting up in the Gulf amid Saudi allegations of Iranian sabotage of its oil infrastructure and a U.S. military buildup in the region in anticipation of a Tehran attack. But all that high-charging sentiment vanished within a week, after the Trump administration upped the ante in its trade war with China, raising fears about a global recession and slump in oil demand.

Gold also enters a new phase of uncertainty on its role as safe-haven, after the U.S. dollar made a return as a preferred hedge against the U.S.-Sino trade war. The greenback’s supremacy to the pound has also made it a better alternative than gold for investors seeking a hedge to Brexit. This was particularly visible after British Prime Minister Theresa May announced her decision to resign on Friday, raising fresh questions about Britain’s divorce from the EU.

Energy Review

Few in the oil trade would have imagined losing their shirts because of a cellphone company. Yet, that’s essentially what Donald Trump’s conflict with China comes down to. The U.S. President’s move to put Chinese mobile giant Huawei at the center of his protracted trade and intellectual property battle with Beijing sent tremors across macro markets fearing more of such action that could undermine global business.

Oil prices were already tottering by Wednesday after an unexpected 5 million-barrel build in U.S. crude stockpiles for a second week in a row. Crude inventories usually draw down at this time of year as refineries ramp up gasoline making to ensure more than enough fuel for Americans hitting the road for Memorial Day. But refiners have been slow in taking up crude this year, with profit margins for making gas, jet and other transportation fuels down 25% from a year ago.

Oil bulls had always counted on U.S. refineries to deliver the demand required for keeping crude prices strong in the run-up to summer. That seasonal trend hasn’t come through this year as refining plants ended up doing longer-than-expected maintenance and processing less crude than anticipated, becoming a new source of frustration to oil bulls already reeling from stubbornly highly U.S. crude production.

And last week’s data showed not only an inventory rise in crude but also products. Total gasoline inventories increased by 3.7 million barrels against forecasts for a drop of nearly 816,000. Distillate stockpiles, which include diesel and other transportation fuels, rose by 800,000 barrels last week versus expectations for a drop of 48,000 barrels.

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