Natural Gas Prods $4.0 Ahead Of Supply Data, USD Stumble Supports Gold

Crude oil faced a bumpy session in US trading overnight on the back of the DOE’s Weekly Petroleum Status Report. As suggested in yesterday’s commodities report; another greater-than-anticipated drawdown in total stocks would likely prove insufficient to yield a recovery for WTI. Indeed, the benchmark seemed to take its guidance from the negative cues offered by the production and distillate readings. The rate of US crude production soared to its highest rate since 1986, lending credence to the idea of a supply glut in the world’s largest consumer of the commodity.

Geopolitical tensions continue to drift off the radar for commodities traders. Ongoing turmoil in Eastern Europe has done little to bolster fears of Russian energy export disruptions. Further, safe-haven demand for the precious metals remains at risk. While the storm clouds over the region remain, without the heavy rain gold and silver may be left wanting for bullish cues.

On the data front; revised second quarter US GDP figures will be in the spotlight for the greenback over the coming session. Traders will be quick to remember the significant revisions to the first quarter data earlier in the year, and may be mindful of the potential for another nasty surprise. Unless we see a material amendment higher to the growth data the US Dollar may be left uninspired, which in turn could keep could keep gold elevated.

Meanwhile, natural gas is probing above the psychologically-significant $4.00 handle ahead of storage injection figures due in the coming hours. The weekly data from the EIA has proven the potential to yield dramatic swings for the energy commodity in the past. Another upside surprise could endanger its nascent recovery.

Recent inventory builds have held above their seasonal average over the past 5 years (see chart below). This suggests the potential for a supply glut to build if incoming data continues the trend. Yet, total stocks remain well below their readings for the same period last year. This leaves the commodity at a crossroads as traders consider whether supplies will prove sufficient to weather the looming US winter.