Crude Oil Firms After API Reports Surprise Draw

The U.S. Dollar fell to its lowest level since September 27 on Tuesday before clawing back most of the early losses into the close. A strong performance in U.S. equity markets hinted at improving risk appetite. This allowed emerging market currencies to outperform the dollar.

Adding to the dollar’s weakness was the consolidation of Treasury yields. After yields surged to multi-year highs last week, the rise in yields has subsided, reducing demand for the dollar. The dollar also lost ground against the New Zealand Dollar, which rose in reaction to higher than expected consumer inflation data.

On Tuesday, December U.S. Dollar Index futures settled at 94.748, down 0.006 or -0.01%.

Conditions changed throughout the session as stocks rallied. This helped reduce demand for safe haven currencies like the Japanese Yen and Swiss Franc, giving the dollar a boost.

Gold

Gold improved on Tuesday, but the market posted an inside move, which typically indicates investor indecision and impending volatility. Traders said the gains were related to short-covering. New longs appeared to be scarce since the rally in the equity markets forced them to re-evaluate their reasons for being long.

December Comex Gold settled at $1231.00, up $0.70 or +0.06%.

If you recall, gold rallied last week primarily on safe-haven buying due to a steep two-day drop in U.S. equity markets. That move may have been fueled by a rapid rise in U.S. Treasury yields. If yields continue to consolidate and stocks continue to recover from last week’s steep sell-off then gold buyers may decide to start booking profits.

In other gold related news, according to CNBC, “holdings of the largest gold-backed ETF, SPDR Gold Trust, rose nearly 2 percent last week. That was its biggest weekly inflow since January, with the fund having registered declines of more than 4 million ounces since hitting a peak in late April. Holdings rose 0.6 percent to 748.76 ounces on Monday.”

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures settled higher on Tuesday after the American Petroleum Institute reported a surprise crude oil draw.

On Tuesday, December WTI Crude Oil settled at $71.76, up $0.15 or +0.21% and January Brent Crude Oil closed at $81.04, up $0.61 or +0.75%.

According to the API, U.S. crude inventories fell by 2.13 million barrels during the week-ending October 12. Analysts were looking for an inventory build of 2.167 million barrels.

The API also reported a 3.4 million barrel draw in gasoline inventories for the week-ending October 12. Analysts had forecast a draw of 1.074 million barrels.

Distillate inventories were down during the same period by 246,000 barrels, compared to a larger expected draw of 1.280 million barrels.

Inventories at the Cushing, Oklahoma, futures hub increased by 1.5 million barrels.