Crude Oil Rebounds from Near 3-Month Low on Saudi Cabinet Comments

January Crude Oil futures rebounded after early session weakness. After the spike higher, prices turned lower once again as investors reacted to a firm dollar and concern over global oversupply.

Earlier in the session, the market tumbled on supply concerns, but then turned sharply higher after the Saudi Cabinet stressed its role in keeping the oil market stable. According to a report from the Saudi Press Palace in Riyadh, during a Cabinet session at Al-Yamamah Palace in Riyadh, the Cabinet stressed the country’s role in the stability of the oil market, and its continuing pursuit to cooperate with all oil producing and exporting countries.

The price action suggests that traders don’t really believe Saudi Arabia will bow to pressure to cut output, but perhaps it was posturing ahead of the December 4 OPEC meeting.

February Comex Gold futures gapped lower and towards a six-year low it traded at last week. Pressuring gold was a stronger U.S. Dollar and recent hawkish talk from Fed members signaling the strong possibility of an interest rate hike in December. Gold did stabilize at one point last week, triggering a short-covering rally. The move was triggered after the release of the latest Fed minutes which raised concerns among traders over the timing of future rate hikes.

The EUR/USD was trading slightly lower after rebounding from a test of its lowest level since April. The selling stopped as some bullish investors came in to defend the 1.0600 level. The seven month low was reached on April 13 at 1.0520.

Despite today’s price action, the long-term view of the Euro is bearish. The single-currency weakened late last week on dovish comments from European Central Bank President Mario Draghi. He reiterated the need for additional stimulus to boost the anemic inflation in the Euro Zone. “If we decide (on Dec. 3) that the current trajectory of our policy is not sufficient to achieve our objective, we will do what we must to raise inflation as quickly as possible”, Draghi said.

Additionally, the yield spread between two-year U.S. Treasuries and German Bunds widened in favor of the dollar due to the monetary policy divergence between the Fed and the ECB. This interest rate differential also helped pressure he EUR/USD.

In other news, German Flash Manufacturing PMI came out higher than expected at 52.6 versus the 52.2 estimate. German Flash Services PMI also beat the estimate with at 55.6 reading. Euro Zone Flash Manufacturing PMI was 52.8 versus 52.3 and Flash Services PMI was 54.6 versus 54.2.

The stronger U.S. Dollar also helped pressure the British Pound. Like the Euro, the interest rate differential and the divergence between the policies of the Fed and the Bank of England favors the dollar.

U.S. existing home sales fell more than expected in October. The National Association of Realtors said on Monday existing home sales declined 3.4 percent to an annual rate of 5.36 million units. Traders were looking for a reading of 5.40 million units. Sales were up 3.9 percent from a year ago.