- The American Petroleum Institute (API) reported a major draw in commercial crude storage, forecasting a drop of 5.78 mmb for the week ending August 25. Gasoline inventories are expected to rise by 0.47 mmb and Distillates may fall by 0.48 mmb for the reporting week.
- Crude Oil has been struggling over the past few sessions as Hurricane Harvey wreaked havoc along the Gulf Coast shutting down refineries and processing units which in turn push oil prices lower as closures would mean lesser demand for oil in the immediate term.
- Refining demand has been one of the key drivers for Crude Oil along with past few months despite rising US production and OPEC’s lack of compliance to output cuts. EIA is scheduled to release its official report at 8 pm with analysts forecasting a 1.9 mmb draw in oil stocks along with minor withdrawals for gasoline and distillates.
- The short term trend should continue to remain weak but we may see some short covering in intraday if oil inventories are in line or better than forecasts.
- Precious Metals are expected to come under pressure today as nonfarm payrolls and revised second quarter GDP strengthened suggesting that the FED may be able to push for another rate hike this year. An increase in rates is typically negative for non-yielding assets like Gold and Silver.
- Non-Farm Payrolls rose 237,000 in August beating forecasts of 183,000 and even stronger than the revised figure of 201,000 in the previous month whereas revised Q2 GDP rose 3.0% compared to analyst expectations of 2.7%.
- The strength in the recent data has seen the dollar recover higher as it raises possibilities of a rate hike from the central bank this December which could be negative for precious metals as a whole. We are expecting limited downsides in prices as geopolitical tensions and safe haven factors continue to underpin demand for such assets.
- We are slightly negative on precious metals for the day and expect further declines towards the closing.