INS: Crude Oil Aims Higher on Improving Demand Bets, Gold Eyes US CPI
Crude oil and copper prices may rise as an improving outlook for US economic growth stokes demand bets. Gold and silver set sights on inflation data.
Crude oil prices rose to the highest in over a month yesterday after a broadly supportive set of US economic data bolstered the demand outlook in the world’s largest consumer. Geopolitical jitters continued to compound upward pressure after Iran claimed a “major” breakthrough in its nuclear program after 3,000 next-generation centrifuges were allegedly installed at its main enrichment site in Natanz. The US State Department dismissed the news as “hype” for the domestic audience.
While the war of words between Tehran and Western powers continues, there seem to be signs of a stealth effort toward accommodation in the works. As we noted yesterday, reports indicate Iran cancelled military exercises in the Strait of Hormuz set for this weekend, which is can be interpreted as a conciliatory measure. This could open the door for the geopolitical premium to begin making its way out of crude prices, but a clear bearing on this front will not be had until the weekend passes and the cancellation rumors are confirmed.
In the meantime, the US economic calendar is in focus. The composite Leading Indicators gauge is expected to print at the highest since July 2008 today, which promises to encourage demand expectations higher and keep prices well supported. Copper may likewise see upside momentum as stronger US data underpins the outlook for the world’s second-largest importer of the cycle-sensitive base metal. Gold and silver will be focused on the US Consumer Price Index report as inflation expectations remain in the spotlight. Core inflation is expected to hold unchanged at an annual rate of 2.2 percent in January, which ought to prove net-neutral for QE3 expectations and may yield a muted end to the trading week.
Prices continued higher after breaking through resistance at 101.28, with the bulls pushing onward to challenge the mid-November swing top at 103.35. A break above that barrier targets 105.54. The 101.28 level has been recast as near-term support.
