OIL PRODUCTS: Oil Products End of Day Summary: Cracks Fall

A new survey from the Pew Research Center has found that “Most U.S. adults favor deporting some or all immigrants who are living in the United States illegally,” but, “At the same time, many expect deportations to lead to higher food prices in their area.”

• Pew notes: “Around four-in-ten adults (42%) say deportations of immigrants who are in the country illegally will lead to increased food prices where they live. About a quarter (23%) expect deportations to have no effect on food prices, while 12% say they will lead to lower food prices.”
• Oxford Economics noted in a report this week: "While a successful campaign of mass deportations from the US is not part of our baseline forecasts, it represents a substantial downside risk as it would likely raise costs and deplete demand."
• The report notes: "If this downside risk materializes, we see the negative sectoral impacts being transmitted through two channels. Decreasing the supply of labour will put upwards pressure on wages and costs, which would lead to higher prices for consumers... A deportation campaign that removes even 50% of [the undocumented construction workforce] could lead to significant labour shortages and cut compound growth rates by half over the course of the Trump administration."

Figure 1: % “Who Say Deportations of Immigrants Living in the US will Lead to:”  

Source: Pew Research Center

• Gold has rallied sharply today, notching up gains of around $100/oz as it has continued to benefit from strong haven demand and US dollar weakness amid the tariff uncertainties.
• The yellow metal is currently up by 3.1% at $3,331/oz with this latest extension putting prices back into technically oversold territory on the 14-day RSI – although that's been no barrier to the persistent rally in precious metals in recent weeks.
• Today’s gains in gold reinforce the current bullish technical picture, confirming a resumption of the primary uptrend. The next objective is $3,347.67, a 1.382 projection of the Dec 19 - Feb 24 -Feb 28 swing.
• Copper has also rallied further, buoyed by reports that China may be open to talks with the US. The red metal has risen by 1.0% to $473/lb, taking total gains since last week’s low to almost 16%.
• From a technical perspective, copper futures remain in a bear-mode cycle and the latest recovery appears corrective - for now. However, price has pierced firm resistance at $471.63, the 50-day EMA, a clear break of which would open $490.27, a Fibonacci projection.
• Meanwhile, crude markets have been supported by the potential signs of easing US-China trade tensions, as well as further US sanctions on entities involved in Iran’s oil trade, including another Chinese teapot refiner.
• WTI May 25 is up by 1.6% at $62.3/bbl.
• For WTI futures, initial firm resistance is seen at $64.85, the Mar 5 low and a recent breakout level.

Powell says "I do think we'll be moving away from" the dual mandate goals "probably for the balance of this year. Or at least not making any progress, and then we'll resume that progress as we can." 

• He repeats that "the tariffs are larger than than forecasters had expected, certainly larger than we expected, even in our upside case."
• Powell asked on whether the Fed would intervene if the stock market falls sharply, he says "I'm going to say 'no', with an explanation... what I think is going on in markets is markets are processing what's going on. And you know, it's really the policies, particularly the trade policy. And really the question is, where is that going to come in? Where's that going to land? And we don't know that yet, and until we know that, you can't really make informed assessments, that would still be highly uncertain. Once you know what the policies are, it'll still be highly uncertain what the economic effects will be. So markets are struggling with a lot of uncertainty, and that means volatility. But having said that, markets are functioning conditional on being in such a challenging situation, Markets are doing what they're supposed to do. They're they're orderly and they're functioning, just about as you would expect them to function."
• Asked about the rise in Tsy yields, Powell doesn't sound concerned: "I think it's very hard to know [why] In real time. I've had a lot of experience with significant moves, for example, in the bond market, where there's a narrative that people land on, and then two months later, you look back and go, that was completely wrong. So I think it's very premature to say exactly what's going on. Clearly, there's some delevering going on among hedge funds in levered trades and things like that. It's also, again, it's the markets processing historically unique developments with great uncertainty and I think you'll see you'll probably see continued volatility, but I wouldn't I don't I wouldn't try to be definitive about exactly what's causing that - I would just say, markets are orderly and they're functioning kind of as you would expect them to in this time of high uncertainty."
• Powell asked about March's decision to taper balance sheet runoff, says "we're not particularly close to the point where we would stop" QT.