Oil slumps after US inventories rise more than expected; Powell Part Deux; Gold bulls

Ed Moya MarketPulse

Oil prices dropped after the EIA report delivered a bigger than expected build and as American drillers took production to a fresh record high at 12.8 million barrels per day. Crude stocks rose 2.22M barrels, higher than the eyed increase of 1.5 million bpd. The Keystone outage, which put 590,000 barrels of crude off line contributed to crude imports dropping to the lowest levels in more than two decades.

Oil prices were respecting the upper boundaries of the relatively tight November range before the bearish report. With waning risk appetite hitting global markets, it seems the easiest path for oil prices is lower. West Texas Intermediate crude might not have much in the way on way towards $56.00 a barrel. Energy markets will remain fixated on rhetoric from OPEC +, trade updates and whether Beijing can somehow de-escalate the situation in Hong Kong with out sending more troops.

Powell

Fed Chair Powell’s second day of testimony to Congress feels like a repeat of yesterday. Powell mostly avoid partisan arguments and noted that the US economy is a star economy these days. The US economy is not showing any signs of overheating and Powell’s comments mostly supported the Fed’s new stance of keep rates on hold for the foreseeable future. Powell is becoming more vocal on the deficit and we will likely this become a growing concern in 2020.

Gold

The battle between gold bugs and market optimists is seeing a fresh wave of sellers for the time being do little to derail long-term bulls. The optimism from a phase-one deal is heavily priced and we may see geopolitical risks be the key driver for underlying support for gold. Hong Kong, Brexit and the 2020 election remain huge tail risks that will not be resolved anytime soon.

Author

Ed Moya

MarketPulse

With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa.

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