Surprise draw from EIA, gold goes tubthumping

Oil’s upswing continues

Oil prices held onto gains despite a wrath of US data that suggests the fourth quarter in the US could see a return to contraction.  Commodity prices should benefit from a weaker dollar since this wave of US data supports the notion that the Fed will do more and eventually Congress too.  It seems energy traders for a third consecutive week are riding coronavirus vaccine headlines that are forcing everyone to raise their crude demand outlook forecasts for 2021.

Given the current wave of lockdowns across the US and Europe, the consensus is that OPEC+ will roll over the current oil output deal next week.  What makes it easier for OPEC+ to extend production cuts is that oil prices are higher and widely expected to rise next year.  Now is not the time to fight for market share; that will be sometime late next quarter.

WTI crude held onto most of its gains following the EIA crude oil inventory report showed a small decline in stockpiles.  Crude oil inventories fell 754,000 barrels, better than the expected build of 234,000, and nowhere near last night’s API build of 3.8 million barrels.  It wasn’t completely a bullish report as gasoline stockpiles rose almost 3X than expected to 2.18 million barrels and US production posted another weekly increase.

Gold holding onto USD1800 level

Gold got knocked down, but got up again as bullion bulls bet that you are never gonna keep me down (thank you Chumbawamba).  Long-term investors are scaling back into gold as US labor market concerns likely increase the likelihood the Fed will deliver more stimulus at the December 16^th meeting. Jobless claims posted the first consecutive increase and expectations are for more lockdowns to have that go up significantly over the winter.

A Biden administration will likely deliver more lockdowns once he takes office in January and that will only raise the pressure for Congress to do more.  Gold is holding the USD1800 level and could continue to stabilize towards the USD1850 region.

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