Oil prices edged lower on Wednesday, as investors looked ahead to weekly data from the U.S. on stockpiles of crude and refined products.
Oil on the back foot ahead of U.S. supply update – Oil prices edged lower on Wednesday, as investors looked ahead to weekly data from the U.S. on stockpiles of crude and refined products. Oil prices fell for a second straight session in volatile trade on Tuesday. The U.S. Energy Information Administration will release its official weekly oil supplies report at 10:30AM ET (1430GMT). The API report also showed a gain of 1.5 million barrels in gasoline stocks, while distillate stocks fell by 157,000 barrels. There are often sharp divergences between the API estimates and the official figures from EIA. Meanwhile, officials from a joint OPEC and non-OPEC technical committee said on Tuesday that they expect greater compliance with their output-cutting pact. According to recent calculations, compliance fell to 86% in July, the lowest level since January. OPEC and 10 producers outside the cartel, including Russia, agreed since the start of the year to slash 1.8 million barrels per day in supply until March 2018 in order to reduce a global supply glut and rebalance the market. However, so far, the deal has had little impact on global inventory levels due to rising supply from producers not participating in the accord, such as Libya and Nigeria, as well as a relentless increase in U.S. shale output.
Gold prices jump after Trump threatens North Korea – Gold prices scored robust gains on Wednesday, after President Donald Trump warned North Korea it would be “met with fire and fury” if it continued to make threats against the U.S. His comments came on the back of a report that the hermit state had created a miniaturized nuclear weapon that could fit in its missiles. Just hours after Trump’s warning, Pyongyang replied it was “carefully examining” a plan to strike Guam, where a U.S. military base is located. The escalating tension prompted investors to shun riskier assets, such as stocks and high yielding currencies, and flock to traditional safe haven assets like the yen, Swiss franc and gold. With no major economic reports on Wednesday’s calendar, market players looked ahead to monthly inflation indicators due later in the week for fresh clues on the timing of the next Fed rate hike. A report on U.S. producer prices for July is due out on Thursday and the consumer price inflation report will be released on Friday. The yellow metal has been well-supported in recent weeks as fading expectations for a third Fed rate hike this year combined with deepening political turmoil in the White House boosted the appeal of the precious metal. The precious metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.
SILVER – Silver markets initially tried to rally during the day on Tuesday, but found enough resistance just below the $16.50 level to turn around and fall significantly. This was in reaction to the over 6 million jobs available in the United States. Ultimately, this is a market that is highly influenced by the US dollar, and as it rallied that of course brought the market back down to the support region of $16.25. The $16.50 level above is massively resistive, and because of this if we broke out above there I think that it would be a very buying opportunity.
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