Oil retreats on US inventories
Oil beat a modest retreat overnight after US crude inventories fell, but US gasoline inventories rose sharply. Brent crude was almost unchanged at USD72.00 a barrel after giving back intra-day gains, while WTI finished the day 0.40% lower at USD69.75 a barrel. Both contracts have continued to move lower in Asia, falling 0.50% to USD71.65 and USD69.45 a barrel, respectively.
The pullbacks are modest in scale and look more look position adjustments into the US CPI data tonight than a structural turn in sentiment in the greater scheme of things. Given that the speculative market is clearly very long, that makes sense in the circumstance.
Only a retreat below USD70.00 a barrel for Brent crude and USD68.00 a barrel for WTI suggests that the rally is over for now. Otherwise, inflation data or not, Brent crude should target USD75.00 a barrel in the week ahead and WTI USD73.00 a barrel.
Long-covering continues in gold markets
Gold drifted 0.22% lower to USD1886.50 an ounce overnight, as investors continued to reduce long positioning into the US CPI data. Like the moves seen in other asset classes, though, the correction’s scale is modest, and gold’s rally should resume if the CPI data comes in on the lower side, prompting US dollar selling.
With gold’s fate remains tied to the US inflation data tonight, it remains settled into a USD1880.00 to USD1920.00 an ounce range. Only a failure of the USD1840 to USD1845.00 an ounce support zone calls the longer-term rally into question in the bigger picture. Once USD1920.00 an ounce is cleared, gold’s next target will be the USD1960.00 to USD1965.00 an ounce region.
With gold, oil and commodities at or near multi-month highs, either the street thinks the inflation story is overdone, or there is a severe degree of complacency out there. US data over the past two months has not confirmed the story one way or the other.