Oil higher post CPI & EIA report, gold steady

Oil extends rally on EIA drawdown

Crude prices extended gains after oil inventories fell to the lowest levels since October 2018.  The EIA crude oil inventory posted a larger-than-expected headline decline of 4.55 million barrels versus an expected 1.6 million draw. Both gasoline and distillate inventories rose as consumption decreased.  Gasoline demand was weaker-than-expected and still below pre-pandemic levels and if this becomes a trend oil won’t be able to continue to push higher. US production edged lower by 100,000 bpd to 11.7 million bpd.

This oil inventory report and in-line CPI reading does not change energy traders’ expectations for the oil market to remain very tight in the short term.  The omicron impact is still expected to be short-lived and with inventories at low levels and OPEC+ struggling to hit their quotas, crude prices seem poised to head higher.

Gold

Gold prices were unfazed after consumer prices delivered a 7% annual gain, the fastest pace since 1982.  Gold has been comfortably above the USD 1800 level after the 10-year Treasury yield rally stalled at the 1.80% level.  Gold seems like it is in a good place as Treasury yields won’t be rallying much higher until financial markets have balance sheet runoff certainty and that won’t happen until at least a couple more Fed meetings.  Balance sheet reduction is the key for the back-end of the Treasury curve and that should mean the move higher in Treasury yields might be tentatively over, which would be great news for bullion.

If dollar weakness accelerates here, gold could make a run towards the USD 1840 level.

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Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya