Although crude oil once again breached 80 in NY session, increase in oil inventory pressured price and the benchmark contract settled at 79.05, down -0.5% for the day.
According to the American Petroleum Institute, crude inventory surged +1.22 mmb to 337.5 mmb in the week ended November 6 as imports rebounded and refinery runs continued to slide. Both gasoline and distillate stockpiles also rose. Gasoline inventory increased +1.4 mmb while distillate stockpile soared +0.64 mmb despite modest increases in demand.
The US Energy Department is scheduled to report oil inventory data Thursday due to US public holiday today. Crude oil inventory probably increased +0.6 mmb last week. For fuel stocks, gasoline probably stayed unchanged while distillate drew +0.7 mmb.
Today in Asia, crude oil moves sideways but with a soft tone. Tropical Depression Ida weakened and blew ashore on the US mainland. Many oil facilities will resume operations today. This relieved worries about supply disruption.
Although profit-taking was seen in gold after Monday's rally to as high as 1111.7, lack of follow-through in USD's buying helped support price. The benchmark contract closed flat at 1102.5.
Fed officials' comments on US economic prospect and monetary policy outlook weighed on the dollar. Dallas Fed President Richard Fisher said that 'looking into 2010 and perhaps to 2011, the most likely outcome is for growth to be suboptimal, unemployment to remain a vexing problem and inflation to remain subdued... current policy is appropriate'. Concerning the dollar's weakness, Fisher commented it's undergoing a 'rather orderly depreciation'.
At the same time, San Francisco Fed President Janet Yellen said monetary policy needs to be accommodative to 'spur job creation and prevent inflation from falling any further below rates that are consistent with price stability'.
With these comments, it's likely the Fed's expansionary monetary policy will remain intact for an 'extended period'. As the Fed keeps its policy rate at low level, it will trigger selling pressure in the dollar, which in turns boosts gold.
The UK is our focus today. The government will release employment data for October while the BOE will release the quarterly inflation report.
Recent economic indicators, such as PMI, BOE and KPMG reports, showed improvement in UK's job market and the pace of job declining should have continued to slow in October. Claimant count probably increased +20K in October after rising +20.8K in the previous month. This would have translated to unemployment rate of 5.1%. The more comprehensive ILO measure of employment probably show unemployment rate stayed at 7.9% in September.
At the quarterly inflation report, BOE is anticipated to have revised down growth rates for 2010 after the unexpected contraction in 3Q09 GDP. Moreover, the medium-term inflation outlook might also be lowered as the central bank extended the asset buying program by 25B pound to 200B pound last week so as to stimulate growth.