Oil prices advanced in American trade on Wednesday and resumed the gains after a short hiatus yesterday, with prices boosted by initial data that showed a drop in US crude stocks to 2022 lows. 

Now traders await the official EIA report later today, also expected to show a drop for the eighth straight week.

Prices are also underpinned by the dollar’s decline as US inflation slowed down, renewing hopes in a Fed interest rate cut in March.

Prices

US crude rose 0.5% to $78.31 a barrel, with a session-low at $77.26.

Brent added 0.3% to $80.60 a barrel, with a session-low at $79.66.

On Tuesday, US crude lost 0.85%, the first loss in four days on profit-taking away from a five-month peak at $79.24.

Brent dipped 0.6% yesterday, snapping a three-day winning streak that sent prices to August 13 highs at $81.64.

US Stocks

Initial data from the American Petroleum Institute showed commercial crude stocks fell by 2.6 million barrels in the week ending January 10, the fifth such weekly drop in a row, while analysts expected a drop of 23.5 million barrels. 

Thus total US crude stocks fell to 416.2 million barrels, the lowest since May 2022, and a positive sign for demand in the US.

US Dollar

The dollar index fell 0.55% today on track for the third loss in a row, plumbing a week low at 108.62 against a basket of major rivals. 

It comes after earlier US data showed inflation data showed prices missed estimates, which reduces inflationary pressures on Fed policymakers and boosts the odds of a rate cut in March.

US consumer prices rose 2.9% y/y in December, matching estimates and up from 2.7% in November. 

Core prices, excluding food and energy, rose 3.2%, below estimates of 3.3%.

The US dollar fell in European trade on Wednesday on track for the third loss in a row, plumbing a week trough on profit-taking away from a 26-month peak as US 10-year treasury yields stalled.

It comes before crucial US inflation data for December, which might provide clues on the path of Fed interest rates this year.

The Index

The dollar index fell 0.25% to 108.97, hitting a week high, with a session-high at 109.30.

The dollar index fell 0.3% on Tuesday on profit-taking away from a 26-month peak at 110.18.

US Yields

US 10-year treasury yields fell 0.55% on Wednesday, about to mark the first loss in four sessions away from a 14-month peak at 4.805%, and pressuring the greenback.

It comes after weak US producer prices data which showed inflation might be tapering off.

US Rates

The recent US payrolls report showed the economy added more jobs than expected in December, while unemployment fell unexpectedly in another sign of the tight US labor conditions.

The report tanked the odds of a Fed 0.25% rate cut in January from 7% to just 2.5%.

Later today, US consumer prices data will be released, expected to show a yearly rise of 2.9%, up from 2.7% in November.

Gold prices rose in European trade on Wednesday and moved in a positive zone for the second straight session, about to hit a four-week high as the US dollar declines against major rivals.

It comes before crucial US inflation data for December, which might provide clues on the path of Fed interest rates this year.

The Price

Gold prices rose 0.3% today to $2686 an ounce, with a session-low at $2669.

On Tuesday, gold prices rose 0.55% and approached a four-week high at $2698.

US Dollar

The dollar index fell 0.25% on Wednesday and expanded the losses for the third straight session, plumbing a week trough at 108.97 against a basket of major rivals.

A weaker dollar makes greenback-denominated gold futures cheaper to holders of other currencies.

The decline came after US producer prices data missed estimates in December. 

US Rates

The recent US payrolls report showed the economy added more jobs than expected in December, while unemployment fell unexpectedly in another sign of the tight US labor conditions.

The report tanked the odds of a Fed 0.25% rate cut in January from 7% to just 2.5%.

Later today, US consumer prices data will be released, expected to show a yearly rise of 2.9%, up from 2.7% in November.

SPDR

Gold holdings at the SPDR Gold Trust fell 2.01 tons yesterday to a total of 872.52, the lowest since January 3.