Gold price set a new record high Tuesday amid USD’s weakness and renewed inflation worries. The benchmark contract for the yellow metal breached the peak of 1033.9 made in March 2008 and surged to as high as 1045. Price eventually closed +2.2% higher at 1039.7. Others in the precious metal complex also strengthened with silver jumping +4.6% to 17.3 and platinum gaining +1.8% to 1025.3.
USD tumbled Tuesday as RBA’s rate hike heightened the rate differential concerns. Moreover, the dollar was pressured after UK’s Independent newspaper said that the Gulf oil states were talking with Russia, China, Japan and France to replace dollar with other currencies in 9 years. Although the news was denied by Saudi Arabia and Russia, the dollar failed to rebound.
Today in Asia, USD pares losses as Kansas Fed President Thomas Hoenig said that the central bank will need to ‘remove the very accommodative policy sooner rather than later’. Gold price trades narrowly around yesterday’s close. There’s possibility for the yellow metal to pullback after rallying almost +4% in the past 3 days. Silver and platinum continues to extend gains but we believe the rise silver should stabilize as it has gained +7% over the past 2 days.
Crude oil added +0.7% to settle at 70.88. The benchmark contract surged to as high as 71.97 Tuesday. Others in the energy complex had mixed performance. RBOB gasoline and heating oil gained +1.1% and +1.2% respectively while natural gas slid -2.2%.
After market close, API reported its estimates on oil inventory. Crude oil inventory declined +0.3% mmb, compared with consensus of a +2.2 mmb build, to 339.4 mmb in the week ended October 2. Rise in refinery runs slightly outweighed increase in crude imports. Cushing stocks dropped -0.22 mmb. The pleasant surprise came from distillate stockpile which drew -2.91 mmb to167.8 mmb. The market had anticipated another week of build. Gasoline stockpile rose +0.54 mmb, compared with forecast of a +0.71 mmb increase.
The above readings were supportive for oil price and increase the possibility that we will get a set of positive results in the report by the US Energy Department. Crude inventory probably gained +2mmb while gasoline built +1.4 mmb. For distillate, stockpile might have declined -0.4 mmb after months of increases.
US Oil Inventory
| Weekly change in inventory as of 02/10/09 | Change | Market Expectation | Previous |
| Crude oil | +2.00 mmb | +2.80 mmb | |
| Gasoline | +1.4mmb | -1.66 mmb | |
| Distillate | -0.7 mmb | +0.32 mmb |
Comparison between API and EIA reports:
API (Oct 2) | EIA (Oct 2) | |||||
Actual | Inventory | Previous | Forecast (using API’s inventory level) | Inventory | ||
Crude oil | -0.25 mmb | 339.4 mmb | +2.76 mmb | +0.96 mmb | 339 mmb | |
Gasoline | +0.54 mmb | 213.0 mmb | -1.72 mmb | +1.59 mmb | 213 mmb | |
Distillate | -2.91 mmb | 167.8 mmb | +2.29 mmb | -3.29 mmb | 169 mmb |
API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department (EIA)for its weekly survey. Oil inventories from the API and EIA moved in the same direction for over 70% of the time, using data in the past 4 years.
Source: Bloomberg, API, EIA