Crude Oil Adds to Gains as EIA Report Shows Fifth Straight Weekly Drawdown

Crude oil added to its earlier gains on Wednesday after government data showed a fifth straight weekly decline in U.S. crude inventories. This was on top of a bigger than expected draw down as reported by the American Petroleum Institute late Tuesday.

According to the U.S. Energy Information Administration (EIA), U.S. inventories dropped 3 million barrels to a total of 499.7 million barrels in the week through September 30. Traders had priced in a rise in crude stocks of 2.6 million barrels. Late Tuesday, the API reported a 7.6 million barrel decline.

Brent crude topped $52.00 on the news and November West Texas Intermediate Crude Oil rose to $49.81, up $1.12 or +2.30%.

Gasoline stocks rose by 222,000 barrels, less than the 702,000 barrel expected gain. Distillate stockpiles fell by 2.4 million barrels versus a 700,000 barrel-drop estimate.

CURRENCIES

September U.S. Dollar Index futures rebounded after early session weakness, driven higher by positive economic news. According to ADP, the U.S. private sector added 154K jobs in September. This came in below the 166K estimate and may be an indication the economy has reached full employment. This report is viewed as a preview of the U.S. Non-Farm Payrolls report on Friday.

In other news, the U.S. trade deficit widened to $40.7 billion in August. This came in below the minus $41.1 billion estimate. Final Services PMI came in at 52.3. This was higher than the estimate and the previous read. ISM Non-Manufacturing PMI jumped to 57.1, up from 51.4. It also blew out the 53.1 estimate.

The British Pound fell below $1.2700 for the first time in over 30 years on worries that Britain’s separation from the European Union could be difficult and have adverse economic consequences for the U.K. and the Euro Zone.

The EUR/USD did not follow through to the upside after Tuesday’s strong reversal was tied to reports the European Central Bank will taper its bond buying program.

GOLD

December Comex Gold futures continued to hover around three-month lows reached on Tuesday, but fresh sellers did not respond to the strength in the U.S. Dollar. This could be an indication of a technically oversold market. Traders are blaming the increased probability of an interest rate hike for the current weakness as well as the absence of buyers due to a holiday in China.