OIL: Crude Rallies On Trade Hopes & Less Expected US Output

• Gold has benefited more than most in the trade war build up yet with it now in full swing, even it is suffering.
• Gold lost ground for the week last week for only the second time this year.
• Falling by -1.52% gold has been hit by the broadening trade wars’ potential impact on the global economy.
• Gold follows a general commodities rout with London’s Metal Exchange having the biggest decline since early 2020.
• Having touched highs of $3,134.17 at the start of last week,  gold saw forecasters restating their year end forecasts higher and higher.
• Gold has fallen dramatically since, breaking through $3,000 this morning to be at $2,982.20.
• Gold has traded through the 20-day EMA of 3030.25 with the next key technical level, the 50-day EMA of 42,945.25

Oil prices fell sharply on Friday and have continued the downtrend during APAC trading so far today in response to expectations that global growth and thus demand for crude will be severely impacted by the imposition of significant tariffs on US imports and China’s retaliation. This concern has driven Saudi Arabia to reduce its benchmark Arab Light by $2.30/barrel for Asia in May, which is pressuring markets today. The pullback in overall risk appetite continues with AUDUSD down 0.7% and S&P e-mini -3.6% today.

• WTI is down 3.4% to $59.87/bbl today after falling 6.9% to $62.32/bbl on Friday. It reached a low of $60.45, which it has breached today. The benchmark has broken below 4 support levels, including the bear trigger.
• Brent fell 5.8% on Friday to $66.06/bbl off the intraday low of $64.03. It is down a further 3.3% to $63.44 at the start of today’s APAC session. It has broken the bear trigger at $67.95 and key medium-term support at $67.87 as well as level 4 at $66.55. Not only has the bullish theme been cancelled but a bearish one has been strengthened.
• Earlier in 2025, oil prices fell on news that OPEC would go ahead with the start of its output normalisation in April but the size of the increase in production was larger than expected, which has exacerbated recent price moves. Forecasts have been for a market surplus in 2025 for some time and it could now be worse with lower expected demand and higher-than-forecast OPEC output. 

In early-Tokyo trade, JGB futures are sharply higher, +60 compared to settlement levels, with cash US tsys bull-steepening, benchmark yields 5-15bps lower, in today’s Asia-Pac session. 

• Labor & Real Cash Earnings have printed higher than expected at +3.1% y/y and -1.2% y/y respectively versus estimates of +3.0% and -1.3% and priors +2.8% and -1.8%. The same Sample Base measures printed +2.4% y/y and +1.9% y/y respectively versus estimates of +2.9% and +1.9% and priors +2.0% and +3.0%.
• The local calendar will also see Coincident & Leading Indices data later.
• President Trump's tariff announcement has sparked a huge fall in equities and bond yields as investors anticipate that the US economy will be hit hard.
• That said, the market has realised this is not just a US problem. A raft of Asian economies have reached out to the US looking to remove either levies on US imports or open trade talks. However, China unveiled a 34% duty on all US imports, and this will be front centre as the market attempts to digest the implications of this in the Asian session.
• Cash JGBs are 5-12bps richer across benchmarks, with the belly leading. The benchmark 10-year yield is 10.3bps lower at 1.114% versus the cycle high of 1.596%.
• Swap rates are 6-10bps lower. Swap spreads are mixed.