Crude Rises on Weaker Dollar; Saudis Cut Exports to Asia

The markets reacted in volatile fashion to Trump’s press conference and that was expected. After all, he hadn’t held one since he won the election in November. So while the price action may have been volatile on an intraday basis, when the dust settled, the major markets remained relatively unscathed.

Crude Oil

Trump’s comments may have had some influence on crude oil prices because they did weaken the U.S. Dollar, however, it probably wasn’t enough to produce the market’s nearly 3 percent gains on Wednesday. The largest influence on prices was the news that Saudi Arabia had cut exports to Asia.

In other crude related news, the weekly government inventories report showed a bigger-than-expected weekly build in U.S. crude and fuel inventories. According to the U.S. Energy Information Administration, U.S. inventories increased by 4.1 million barrels during the week-ending January 6. Traders had been looking for a 1.2 million barrel build.

The EIA report also showed crude production rose notably. Overall production was 8.95 million barrels per day last week, the most since April of last year.

U.S. crude imports rose last week by 1.8 million bpd to 8.3 million bpd. Gasoline stocks rose by 5.0 million barrels versus an estimate for a 1.6 million-barrel gain. Distillate stockpiles rose 8.4 million barrels, versus expectations for an 899,000-barrel increase, according to the EIA.

U.S. Treasurys

March 10-Year U.S. Treasury Notes rose slightly on Wednesday after President-elect Trump’s press conference. The volatility didn’t hit this market which suggests money managers feel that it was a non-event since Trump did not give details on some of his economic policies, particularly deregulation, lower corporate taxes and fiscal stimulus. The price action suggests that traders will react in a more volatile fashion once Trump reveals the details of his plans.

In other news, the Treasury Department auctioned $20 billion in 10-year notes at a high yield of 2.342 percent on Wednesday.

Gold

February Comex Gold futures rose sharply on Wednesday, largely influenced by the weaker U.S. Dollar which made the precious metal a more attractive investment to foreigners. The fact that gold has been rallying since the Fed raised rates on December 14 suggests investors are not focusing on interest rates but rather political uncertainty.

Besides questions over whether Trump can run a government or whether he can achieve any of his policy announcements, gold investors are also focusing on the uncertainty surrounding Brexit. Additionally, retail customers are expected to continue to support gold prices because of expected weakness in the British Pound.