Crude oil
Oil price advanced to more than $90/barrel on Tuesday after American Petroleum Institute announced huge reduction of oil reserves last week.
On the NYMEX, light sweet crude futures for February were up 69 cents, or 0.8% to $90.06 per barrel.
According to API, U.S. oil reserves decreased by 5.8 mln barrel for December 11-17. Gasoline reserves declined by 2.9 mln barrel and reserves of distillates, which include diesel and heating oil, remained flat.
However, market participants are waiting for the reliable reserve data by the Department of Energy due on Wednesday. As per forecasts, the DOE data will indicate 2.3 mln barrel crude oil reserve decrease for December 11-17. As estimated, gasoline reserves should have advanced 900.000 barrel and reserves of distillates should have been down by 600.000 barrel.
The reserves have still been exceeding average levels, but extension of the recent decline, if any, will cause oil prices to increase in 2011.
In general on Tuesday oil futures followed stock markets and other external guidance. U.S. stock indices were up due to hopes for activity in the Mergers and Acquisitions sphere after Canadian Toronto-Dominion Bank agreed to purchase Chrysler Financial for $6,3 bln.
The trading was volatile as low activity increased the influence of small deals. Many traders have still been reluctant to open big positions before Christmas and New Year holidays, and most of December oil has been trading in a narrow range between $88 and $90.
Nevertheless, continuous data flow indicating improvement in the U.S. economy has still been supporting oil prices. Later this week several reports will give more details about the current economic state. GDP data for the 3rd quarter is due on Wednesday and durable goods orders report is expected on Thursday.
Gold
Gold futures closed on the upside on Tuesday amid declining euro and concerns about financial stability in Europe that maintained the interest to metal purchase. According to COMEX session’s results, February gold futures rose 2.70 dollar, or 0.2% to $1388.80 a troy ounce.
Gold prices had a hard time remaining on the upside amid the euro decreasing against the dollar. Advancing U.S. currency increases the price of gold futures for other currency holders. Financial uncertainty in Europe helps avoid the traditional gold price decline in the Christmas season, that is conditioned by traders and investors fixating the year’s profit from metal. Moody’s agency disturbed European debt markets by announcing possible decrease of Portugal’s A1 long-term credit rating. The agency referred to uncertainty about the country’s long-term economic prosperity and its ability to refinance debts at an acceptable price.
On Friday Moody’s lowered Ireland’s credit rating. It happened several weeks after the country received financial assistance from the EU. In the meantime, Fitch Ratings placed Greece in the list for rating revision and warned that its rating can be lowered to “junk”. These danger signals force investors to put funds in gold, and some investors purchase gold to protect themselves against currency fluctuations.
