Bullish EIA Report Drives Crude Oil to Highest Level Since Early February

Copper prices rebounded from early weakness to close higher for the session on Wednesday. The technical closing price reversal bottom was fueled by a number of factors including oversold conditions, a supply deficit and a weaker U.S. Dollar.

May Comex High Grade Copper futures settled at $3.0585, up $0.0205 or +0.67%.

The session began with the market testing its lowest level since December 11. This was enough to draw the attention of speculative buyers who came in strong enough to fuel a massive intraday short-covering rally and a higher close.

The news of another year of supply deficit for copper was also supportive for the industrial metal. According to the International Copper Study Group (ICSG), the global refined copper market recorded another year of supply-usage deficit in 2017.

The U.S. Dollar weakened after the U.S. Federal Reserve signaled a slower pace of rate hikes this year. This made dollar-denominated copper a more attractive asset to foreign buyers.

Gold

Gold futures rose on Wednesday in response to a weaker U.S. Dollar. The recovery by the safe-haven asset suggests investors were heavily short going into the release of the U.S. Federal Reserve’s interest rate decision, monetary policy statement and economic projections.

June Comex Gold settled at $1327.30, up $9.70 or +0.74%.

The price action in the U.S. Dollar was the biggest influence on gold prices. Other factors were weaker U.S. equity markets, which drove up demand for the safe haven asset and concerns the U.S. could ignite a trade war with China after President Trump’s expected announcement on Thursday of new sanctions against the country.

Initially, gold investors appeared to have no problem with the Fed’s quarter-point rate hike and forecast for two more rate hikes this year. However, prices began to strengthen as Fed Chair Jerome Powell briefed journalists during a press conference. During the Q and A session, Powell hesitated to acknowledge the Fed’s perceived hawkish tone, suggesting that perhaps investors had misinterpreted the tone of the Fed’s monetary policy statement.

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil closed at their highest levels since February 1 on Wednesday after the government reported a surprise decline in U.S. inventories. Other catalysts behind the rally were Middle East tensions and worries about Venezuela’s production slide.

May WTI Crude Oil futures settled at $65.17, up $1.63 or +2.57% and June Brent Crude Oil closed at $69.07, up $1.94 or +2.89%.

According to the U.S. Energy Information Administration (EIA), crude oil inventories declined 2.6 million barrels the week-ending March 16. Analysts were looking for a 2.5 million barrel build.

Speculation that the United States may reimpose sanctions on Iran also helped boost prices because this would lead to a disruption of supply.