On Monday, the spread between Brent and WTI hit a six-month high as WTI posted relatively large losses in otherwise calm session. US light sweet oil price was falling since early morning and in the afternoon - after the release of EIA’s Weekly Petroleum Status Report – hit nearly four month low at 99.22 USD per barrel (USD/bbl). The delayed report showed that US crude stockpiles had increased more than expected in a week ending on 11th October (by 4 million barrels instead of expected 2.2 million). The unexpected built in crude stockpiles stemmed from lower utilization rate which fell to its 5 year October average.
Nevertheless, let us recall that crude inventories at Cushing have fallen sharply in last six months – by about one-third or, in nominal terms, by nearly 17 million barrels – as transport infrastructure and higher refinery runs alleviated the pressure on the oil hub from rising domestic oil production. Therefore, we think that currently wide spread between Brent and WTI may tighten again in weeks ahead as refinery utilization rises and more oil is transported directly to US Gulf coast.
After surging to 1320 USD per troy ounce (USD/toz) on Friday, the price of gold failed to benefit from prospects of further money-printing by the Fed and the price has been drifting lower. Yesterday, gold settled barely changed at 1316 USD/toz, that is, just shy above support at 1310 USD/toz.
Today, all eyes will be on the US September payrolls report. After two months of disappointing payrolls (July and August), it will be interesting to see whether there are signs of improvement in September. We believe the headline figure could be slightly stronger than forecast (180k). If that’s true, the price of gold might be under mild pressure (which might however be strengthened by breaching supports at 1300 USD/toz).