Crude Oil Continues to Consolidate

December Crude Oil futures are trading lower today after the market failed to follow-through to the upside, following yesterday’s higher close.

Yesterday, the U.S. Energy Information Administration reported in its weekly petroleum status report that U.S. commercial crude inventories increased by 2.1 million barrels last week, maintaining a total U.S. commercial crude inventory to 379.7 million barrels. This puts crude oil inventory near the top of the five-year range for this time of the year.

The 2.1 million barrel increase was lower than the 3.3 million barrel increase estimate by traders. This helped give the market a little boost combined with the 1.2 million barrel decrease in gasoline inventories.

December Comex Gold futures had a volatile day on Thursday, plunging sharply lower earlier in the session. The catalyst behind the volatility and the higher close was Wednesday’s U.S. Federal Open Market Committee announcement.

In its statement, Fed policymakers implied the central bank was moving toward a tighter monetary policy more quickly than its peers at the Bank of England and the European Central Bank.

The Fed also announced the end to its monthly bond-buying at the end of this month. In addition, it said in its statement that interest rates could rise sooner or later, depending on how the economy performs. The central bank also dropped the word “significant” in describing underutilization of the labor market. This serves as a sign that it has turned more upbeat on the jobs market.

The initial reaction to the Fed news was bearish to the British Pound and Euro, but bullish for the U.S. Dollar. Nonetheless, short-covering and position paring today helped support the GBP/USD and EUR/USD. The major players in both of these Forex pair markets are on the sidelines today ahead of tomorrow’s Euro Zone consumer inflation report, allowing for counter-trend trading.

In other news, Spanish Flash CPI was reported at -0.1% versus an estimate of 0.0%. German Unemployment Change showed an unexpected drop of 22K versus an estimate of 4K.

On Friday, Euro Zone CPI Flash Estimate is expected to be 0.4% versus last month’s 0.3% reading. The Core CPI Flash Estimate is expected to be 0.8%. Traders are looking for the Euro Zone Unemployment rate to show a reading of 11.5%.

Look for a bearish tone to development in the EUR/USD market if the inflation figure is lower than expected, bringing the Euro Zone economy closer to a deflationary state.