Crude Oil Set to Finish Near 2-Month Low

January Crude Oil futures are trading lower on Friday and are likely to finish the week near a two-month low and in a positon to challenge the August 24 bottom at $39.97. Once again, the catalyst behind the selling pressure are concerns over the global supply glut.

The primary drivers of supply remain excessive OPEC production and increasingly efficient U.S. shale operations. The recently stronger U.S. Dollar also contributed to lower prices because it helped quash any foreign demand. Crude oil supply has exceeded demand by 700,000 to 2.5 million barrels per day in 2015, creating a glut that may last well into 2016.

The week will finish with U.S. crude stockpiles showing an eighth straight week of stock builds, according to the Energy Information Administration. Additionally, the spread between the nearby futures contract and the deferred, has increased to nearly a record at $8.00 per barrel. This suggests that traders are storing more crude oil in the hope of delivering later at higher prices.

February Comex Gold traded higher on Friday and is set to finish the week on the plus-side for the first time in four weeks. The market was able to bounce back from a 6 ½ year low after the Fed released softer-than-expected minutes from its last meeting. The minutes suggested the Fed would move cautiously on rates which was less-hawkish than traders previously perceived from the FOMC monetary policy statement.

The EUR/USD and GBP/USD showed similar strength in reaction to the Fed minutes, but prices have fallen since. Nonetheless, the Forex pairs are expected to finish mixed with the Euro lower against the U.S. Dollar and the British Pound a little higher.

The Euro fell after two days of gains, pressured by comments from European Central Bank President Mario Draghi who reiterated his position to add more stimulus to the Euro Zone economy to raise inflation. Earlier this week, the Euro slipped below $1.0700 before buyers came in to stop the slide, triggering a short-covering rally.

Draghi said that he would do whatever it takes to raise inflation as fast as possible. This includes cutting deposit rates further and expanding or extending its current 1.1 trillion Euro quantitative easing program.

Short-covering continued to boost the GBP/USD for a second week. Although U.K. consumer inflation remained negative, some short-sellers likely adjusted their positions after this week’s CPI report came out unchanged.

Later today, Fed member William Dudley is scheduled to speak. He may reiterate the hawkish statements from several Fed speakers earlier this week.