Crude Oil Falls on Surprise API Build, Gold Strengthens Despite Stock Market Rebound

The American Petroleum Institute (API) reported an unexpected crude oil inventory build of 6.9 million barrels for the week-ending December 21. Natural gas futures posted another wide trading range on Thursday as investors primarily ignored potentially bearish weather reports, reacting instead to the expiration of the January futures contract. Gold futures closed higher on Thursday despite increased demand for higher risk assets.
James Hyerczyk
Commodities - Crude Oil, Natural Gas, Gold
Commodities – Crude Oil, Natural Gas, Gold

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures tumbled late in the session on Thursday after the American Petroleum Institute (API) reported an unexpected crude oil inventory build of 6.9 million barrels for the week-ending December 21. The number exceeded analyst estimates of 2.869 million barrels.

This figure only added to the supply uncertainty in this market after the API reported a more than 3 million barrel build last week, followed by a U.S. Energy Information Administration weekly inventories report that showed a draw of 500,000.

On Thursday, February WTI crude oil settled at $44.61, down $1.61 or -3.61% and March Brent crude oil closed at $52.73, down $2.03 or -3.85%.

Inventories at the futures hub in Cushing, Oklahoma also climbed this week by 1.8 million barrels.

The API also reported a build in gasoline inventories for the week-ending December 21 of 3.7 million barrels. This was well above the estimate of 28,000 barrels. Distillate inventories, however, fell last week by 598,000 barrels. Traders were looking for a draw of 529,000 barrels.

Natural Gas

Natural gas futures posted another wide trading range on Thursday as investors primarily ignored potentially bearish weather reports, reacting instead to the expiration of the January futures contract.

“The January natural gas contract expired with strength today despite unimpressive afternoon weather model guidance and far weaker cash. Short-term, we remain concerned that weak cash, loose balances and unimpressive early January cold will prevent the February contract from moving much higher. However, by next week, balances should begin to tighten and models should increase long-range cold risks, skewing risk higher still over the next week or two,” Bespoke Weather Services said.

On Thursday, March natural gas futures settled at $3.353, up $0.070 or +2.09%.

Gold

Gold futures closed higher on Thursday despite increased demand for higher risk assets. Gold has been able to hold on to this week’s solid gains in spite of back-to-back strong performances in the U.S. equity markets because the dollar has remained weak. Furthermore, the excessive volatility in the stock market suggests instability which is probably being driven by uncertainty over the lingering trade dispute with China, growing expectations of a recession and the prolonged government shutdown.

On Thursday, February Comex gold settled at $1281.10, up $8.10 or +0.63%.

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