Oil slipping ahead of EIA report
Oil prices are slipping a little again but continue to hold above the early November lows which is increasingly becoming a key level of support. A move below here – roughly USD 78 in WTI, USD 80 in Brent – could see a much deeper correction on the cards.
While the market remains fundamentally bullish, there are more reasons for caution at these levels which may be driving the pullback we’ve seen. Whether that be slower growth this quarter, lower oil demand forecasts from OPEC or the risk of an SPR release in the US. Traders have been given reason to lock in some profits after an extraordinary run.
There was nothing extraordinary about the API release on Tuesday, which showed a slightly lower inventory build than expected. The market popped slightly but quickly gave these gains back and proceeded to pare earlier gains ahead of the release. EIA is expected to report a similar gain of around one million barrels later today.
Gold in retreat ahead of Fed speak
Gold was in retreat on Tuesday after US yields and the dollar popped higher in response to the bumper US retail sales report. The yellow metal fell a little shy of USD 1,780 before turning lower and giving back around 1.5%. The rally had been losing momentum in the run-up to the report so it perhaps came at just the right time, allowing for some profit-taking to kick in and a decent correction.
The question now is how eager traders will be to buy the dips given how favoured the yellow metal has been as an inflation hedge. There is a lot of Fed speak to come today which will likely have a big say in whether we’re eyeing a run at USD 1,900 or a larger pullback. The yellow metal has found some support around USD 1,850 so far but the big test may be USD 1,833 where it saw such strong resistance prior to last week’s breakout.
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