Crude Oil Firms but Gains Limited by Bearish Supply Outlook

December Crude Oil futures rose on Tuesday despite a stronger U.S. Dollar which pressured the Euro, British Pound and Gold markets. Volume appeared to be about average in the energy complex, but below average in the foreign currency and precious metals sectors.

The lack of fresh economic news for the second day kept many investors on the sidelines. The volume in the markets is likely to begin picking up with several Fed members scheduled to speak over the next few days. Some traders may not return until Friday when the U.S. releases its latest data on retail sales.

Crude oil bucked the trend on Tuesday by posting a small gain after the International Energy Agency noted unprecedented declines in investment. Gains were limited, however, because of lingering concerns over the huge supply glut.

According to the IEA in its World Energy Outlook report, oil is unlikely to return to $80 a barrel before the end of the decade, despite unprecedented declines in investment, as annual demand growth struggles to top 1 million barrels per day.

Yesterday, OPEC Secretary-General Abdullah al-Badri almost triggered a rally when he made a potentially bullish comment. He said, “We are following market day in and day out, month in and month out. We see that 2016 is really producing some positive results.” However, investors decided that his comments were not strong enough to offset expectations of a rise in U.S. rates and weak global economic growth figures.

December Comex Gold futures finished slightly lower as the market continued to try to rebound, following last week’s sharp sell-off. Gold is primarily mirroring the movement in the U.S. Dollar which is trading flat to higher.

The EUR/USD drifted sideways to lower. There were no major economic events scheduled although the ECOFIN meetings continued. Early Wednesday and Thursday, investors will get the opportunity to react to speeches from ECB President Mario Draghi.

The major market moving event this week is Thursday’s Euro Zone Flash GDP Report. It is expected to show the region grew about 0.4% during the 3^rd quarter.

The GBP/USD was also flat –to-lower as many investors took to the sidelines ahead of tomorrow’s U.K. Labor report. Average Earnings are expected to show a 3.2% gain. The Claimant Count Change is expected to rise by 1.6K. The unemployment rate is expected to stay the same at 5.4%.