Oil prices went on a rollercoaster as energy traders watched President Putin escalate the war in Ukraine and as the EIA report signals some crude demand weakness.
The EIA crude oil inventory report was a lot to process, but it really didn’t deliver that many surprises: Production remains steady at 12.1 million b/d, which is impressive considering oil rig counts have been declining, Imports from Canada are roaring back and that should help restore stockpiles, Jet fuel demand is rather soft despite solid TSA passenger throughput data, and the Strategic Petroleum Reserve steadily draws down.
WTI crude seems to have solid support at the $80 level and even as the Fed seems positioned to deliver a hard landing, the oil market should still remain tight over the short-term.
Gold
Gold is breathing a sigh of relief as Fed funds futures are gaining confidence that the Fed will be cutting rates during the latter half of next year. The hawkish Fed projections are a rather grim outlook for the economy and that could eventually trigger a resumption of a safe-haven role for gold. The Fed acknowledged that we’re at the very lowest levels of what is restrictive and that they are prepared to soften this labor market. This inflation fight is going to get ugly for the economy, but right now it seems the Fed will be done hiking in February.
Gold will remain vulnerable to selling pressure if inflation does not continue to ease, but it could start to stabilize now.