Crude Oil Higher after Surprise Decline in Gasoline Inventories

Crude oil prices are trading higher on mostly short-covering as investors reacted to the U.S. Energy Information Administration’s weekly report that showed that a rise in U.S. crude inventories was not as massive as traders expected. Additionally, prices were supported by a surprise decline in inventories.

The EIA said U.S. crude stocks rose 13.8 million barrels during the week-ending February 3 as refineries cut output, while gasoline stocks decreased. Traders were not too surprised by the EIA’s crude oil number because on Tuesday, the American Petroleum Institute (API) report showed an even bigger 14.2 million barrel increase.

Gasoline futures were the big winner on Wednesday, rising 4.2 percent after the EIA showed a surprise decline in inventories the week-ending February 3 after five straight weeks of increases.

The EIA also reported an increase in U.S. oil production.

Gold

April Comex gold futures pushed to a three-month high on Wednesday as geopolitical risk drove investors into the safe-have asset. Traders are mostly concerned about the political risks of the European elections and President Trump’s policies especially his immigration proposals which are currently awaiting a court decision.

Gold is also being supported by Trump’s protectionism theme which is essentially his plan to increase U.S. foreign trade demand by pushing the U.S. Dollar lower.

Forex

The March U.S. Dollar Index futures contract was under pressure on Wednesday after rallying two days. The catalysts behind the selling pressure were weaker U.S. Treasury yields which declined after investors decided a March rate hike by the Federal Reserve is not likely to happen, and concerns over Trump’s economic policies.

Weakness in the Japanese Yen was fueled by greater demand for lower-risk assets. The biggest factor influencing the yen was political risk in Europe. Traders are expressing concerns over the possible outcome of the elections of France, Germany, Netherlands and possibly Italy.

U.S. Treasurys

U.S. Treasurys rose on Wednesday in reaction to a 10-year U.S. Treasury Note sale and fresh oil inventory data. The Treasury Department auctioned $23 billion of 10-year notes at a high yield of 2.333 percent. Traders called the auction “soft” with the price action reflecting greater concerns with the economy than the stock market is showing.

Later this week, the Treasury Department plans to auction $15 billion in 30-year bonds. There were not major U.S. economic reports on Wednesday.