Crude Oil Posts Strongest Daily Performance in More Than Two Years

U.S. West Texas Intermediate and international benchmark crude oil futures posted their strongest daily performance in more than two years on Wednesday on short-covering and position-squaring amid steep gains in the U.S. stock market. Natural gas futures finished a volatile trading by posting a potentially bullish closing price reversal bottom on Wednesday. Gold prices rose sharply higher early in the session on Wednesday due to safe-haven buying fueled by concerns over the partial U.S. government shutdown, uncertainty over the direction of interest rates and stock market volatility.
James Hyerczyk
Crude Oil
Crude Oil

Stocks weren’t the only assets benefiting from increased appetite for risky assets, commodity markets also posted gains on Wednesday, led by a stellar performance in the crude oil markets. There gains were followed by decent performances in gold and natural gas. These dollar-denominated assets posted gains despite a strong rebound in the greenback.

Crude Oil

U.S. West Texas Intermediate and international benchmark crude oil futures posted their strongest daily performance in more than two years on Wednesday on short-covering and position-squaring amid steep gains in the U.S. stock market. There may have also been some speculative buying as prices began the session hovering near lows not seen since early 2017.

February WTI crude oil settled at $46.22, up $3.69 or +7.98% and March Brent crude oil finished at $54.76, up $3.99 or +7.29%. The nearly 8% gains were crude oil’s largest one-day increase since November 30, 2016, the same day that OPEC signed its agreement to cut production.

There were no major crude oil-related reports on Wednesday with traders agreeing the moves were fueled by the huge gains in the U.S. equity indexes. Some traders are calling the move a relief rally as in it’s a relief that prices didn’t fall further.

Natural Gas

Natural gas futures finished a volatile trading by posting a potentially bullish closing price reversal bottom on Wednesday. The chart pattern suggests the buying may be greater than the selling at current price levels although some will say the move was partly fueled by a generally bullish tone in the financial markets.

March natural gas futures settled at $3.283, up $0.022 or +0.67%.

Traders said the strength in the market came as a surprise because of weakness in the spot market due to the unseasonably mild weather forecast for the next several days. Traders agreed that the rebound in prices was likely due to the expiration of the January futures contract on Wednesday rather than any approaching cold systems.

Gold

Gold prices rose sharply higher early in the session on Wednesday due to safe-haven buying fueled by concerns over the partial U.S. government shutdown, uncertainty over the direction of interest rates and stock market volatility. However, a rebound in the U.S. Dollar led by a huge rally in the stock market encouraged gold investors to book profits and shed positions bought as safe-haven protection. The market still closed higher, but well off its highs.

February Comex gold futures settled at $1273.00, up $1.20 or +0.09%.

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