Commodities – Energy Crude Oil Wipes Out November Rally Despite Plunge in Inventories Crude Oil (WTI) - $80.91 // $0.47 // 0.58% Commentary: Crude oil fell for a fourth day in a row despite a steep drop in U.S. crude oil inventories. The move in crude was interesting considering that U.S. equity markets were virtually flat the entire day. Crude was down between $0.50 and $1.00 before the inventory report, proceeded to rally up to unchanged after the numbers, and then sold off for the rest of the day to end down $1.90, or 2.31%, to $80.44. Crude has virtually wiped out this month’s entire run. We can only speculate as to why crude underperformed to such a degree on Wednesday. OPEC could be keeping a lid on prices by raising production, or the impact from the diesel-related spike in demand from China could be abating as imports make their way to the region. We have seen crude oil imports into the U.S. plunge in recent weeks, with distillate imports in particular virtually disappearing, which could be an indication that supply has simply been shifted from North America to Asia. As we said in our latest report on petroleum inventories: “Imports remain extremely depressed and fell further last week to the lowest since 1997. Such a low level of imports is likely a function of weak demand rather than tight supply. U.S. inventories were and still remain extremely elevated—especially on the product side. Thus, we have seen refineries cut production to bring stocks to more normal levels. Imports fell as refineries demanded less crude. Furthermore, a spike in diesel demand in China has led to premium pricing in that part of the globe, which is another factor that has led to reduced volumes coming into the U.S. Indeed, we have seen U.S. distillate imports completely evaporate, but even so, stocks remain more than ample.” Technical Outlook: Prices have continued to tumble, with the bears just a hair away from challenging the horizontal barrier at $79.49. A break below this boundary exposes a rising trend line set from May’s spike low, now at $77.04. Near-term resistance remains at $83.27.
Commodities – Metals Gold Falls for a Fourth Day but Rebounds Overnight Gold - $1348.20 // $12.20 // 0.91% Commentary: It’s been awhile since gold fell four days in a row, but that was the case on Wednesday as the metal shed another $3.70, or 0.28%, to settle at $1336. It was a day of pause for the rally in the U.S. dollar as the currency fell just slightly versus most of its rivals. Tomorrow we will publish our weekly Gold – Forex Correlations report and all indications are that the numbers will show that this week was another in which gold and the dollar held true to their inverse relationship. Now that gold prices are $90 below last week’s all-time highs, some may be anxious to dip their toes into the water. We would be extremely cautious here, however, for the potential downside remains significant. Consider that it was less than two months ago that gold first surpassed $1300. Meanwhile, gold ETF holdings have risen only slight over the last five months. Technical Outlook: Prices have stalled above support at $1322.39, the 38.2% Fibonacci retracement for the 7/28-11/9 advance. Near-term resistance stands at a previously broken rising trend line set from late July, now at $1358.96. Alternatively, renewed selling pressure that takes prices through current support will target the 50% Fib at $1290.81. Silver - $26.18 // $0.54 // 2.11% Commentary: Silver again bucked the trend in gold prices to advance $0.16, or 0.62%, to settle at $25.63. From peak-to-trough silver had fallen from $29.36 to $24.99, or 15% in a little over one week. A bounce is to be expected, but given how frothy silver remains, it will likely be some time before prices make another significant run higher. The gold/silver ratio fell to 51.5, but remains higher than levels earlier this month near 50. (The gold/silver ratio measures the relative performance of the two precious metals. A higher ratio indicates gold outperformance while a lower ratio indicates silver outperformance). Technical Outlook: Prices are testing higher through resistance at 26.10, the 50% Fibonacci retracement of the 10/22-11/09 upswing. A daily close above this juncture exposes the 38.2% Fib at $26.87. Near-term support stands at $25.33, the 61.8% level, with a reversal lower through this boundary exposing the 76.4% Fib at $24.37.
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