Brent crude saw a volatile session on Wednesday. The price of the front month contract (ICE) fell as low as to 102.1 USD per barrel after the release of EIA’s weekly report but later in the evening rebounded back above 104 USD/bbl level.
Regarding the report, it showed unexpected increase in stocks of both crude and products. The market expected modest draw in crude stockpiles (-0.7 million barrels) but the actual figure was 2.72 mbbl built. The report also more or less confirmed long-term trend of falling US product consumption and increasing domestic production (see the chart). For example, oil production in North Dakota has risen by about five times in last five years.
Regarding the forward curve, the spread between the front-month contract (expires in August) and the second-month contract (September) further widened and reached about 1 USD/bbl.
On Wednesday, gold took advantage of weakening US dollar and rallied by nearly 1.5 percent (the highest gain since the end of July). Therefore, the price of gold breached 1600 USD per troy ounce (USD/toz) level.
The rally, however, prompted some selling in Asia, according to Reuters. The next main event might be tomorrow’s release of US GDP figures for the second quarter (as well as revision of previous ones)which might spur some action from the Fed’s officials.