Oil slumps on EIA inventory report

Crude prices went into freefall after the most bearish EIA crude oil inventory since early in the coronavirus pandemic.  No one saw this massive build coming and oversupply concerns could quickly resurface if this becomes a trend.  The headline draw of 15.2 million barrels was the biggest increase in stockpiles since April and nowhere near the consensus estimate of a draw of 849,000 barrels.  The consensus range was from a 4-million-barrel draw to a 2.3-million-barrel build.

COVID and some seasonal factors delivered the worst decline with crude exports ever.  Crude exports historic plunge of 46.9% to 1.83 million barrels is shocking, but some of that has to be attributed to the closure of the Houston Ship Channel.  With crude exports plummeting, the US became a net importer of petroleum for the first time since September.

Despite the very bearish EIA crude oil inventory report, WTI crude’s tumble found support from this week’s lows.  Vaccine execution and the return to pre-pandemic life is still the primary driver for oil prices and any short-term pressure from the current holiday surges is still viewed as a temporary roadblock for oil prices.

Gold slips as dollar gains ground

Gold prices are retreating as the dollar makes a comeback after Senate Majority Leader McConnell shows no signs yet of capitulating to the Democrats.  Dated, but still important labor data showed that US job openings surprisingly rose to a three-month high in October.  The Jolts Job Openings showed the labor market remained strong leading into the latest virus surge.  Large parts of the US economy need stimulus, but better-than-expected economic releases will likely delay the urgency for Congress to act.

COVID vaccine approvals in the US appear imminent and a tense week of negotiations over stimulus talks will keep gold prices on shaky ground.  Gold volatility is easing and until it makes a transition to the reflation trade, the long-term bullish outlook might take a while longer to reassert itself.

Which way for Bitcoin?

Bitcoin is unable to shake off today’s risk off move as the dollar appears poised for a rebound after falling to a two-year low.  Bitcoin’s bullish thesis is intact for many institutional investors and it should come as no surprise demand emerges on the temporary break below the USD18,000 level.  Bitcoin’s mainstream acceptance continues to head in the right direction and unprecedented global stimulus efforts should drive the inflation trade alongside gold.

Bitcoin could be in the middle of broadening formation and that could translate to a wide USD3000 trading range below the USD20,000 price barrier.

By Ed Moya