Oil prices fall as EIA inventories rise
Crude prices remained heavy after the EIA crude oil inventory showed stockpiles unexpectedly rose last week. The report was mixed as gasoline stockpiles fell more than expected, jet fuel demand roared back to the highest levels since the pandemic began, while diesel demand declined. US production was unchanged and that should remain the case given the downturn in productivity from Permian wells.
The current short-term demand hits from the delta variant should prove to be temporary and that will likely limit the decline in oil prices. Crude was heavy earlier in the day following a softer-than-expected ADP employment change reading.
Gold prices turned negative after hawkish comments from Fed Vice Chair Clarida and a robust ISM Services report that eased earlier concerns over the economy.
It was a data-driven day, as the ISM Services Index report erased traders’ earlier memory of a disappointing ADP report. The service sector rallied to the highest level since 1997, employment surged, and prices paid rose to the highest level since 2005. This report supports a taper announcement at Jackson Hole, which makes Friday’s nonfarm payroll the most important economic data point of the month.
Gold was on the verge of breaking above key resistance following a big miss with the ADP report, but Clarida’s comment that a rate hike environment could be here by the end of next year gave Treasury yields a much-needed boost. The 10-year Treasury yield almost broke below 1.12%, which could have triggered technical selling towards the psychological 1% level. Gold will likely consolidate just ahead of the USD 1,800 level leading up to the nonfarm payroll report.
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