Janet Yellen is getting ready to testify and she seems to be ready to defend her quantitative easing reputation. While some feared she would try to act a little hawkish to fend off criticism from Tea Party Republicans, it seems she is ready to stand tough and defend her QE principles and remind them of her distaste for inflation. Her unashamed attitude for QE is already having an impact on global markets as gold is soaring despite a World Gold Council report on weak demand. Of course that may be looking in the rear view mirror a bit.
The big hit for gold demand was led by India where the Indian government has done whatever it can to slow demand. Import tariffs, gold coin import bans and by weakening the rupee. Despite those efforts the World Gold Council acknowledges a growing black market in gold that may mean that they are underestimating demand. The Wall Street Journal reported that Indian consumer demand for gold—defined by the WGC as jewelry, bars and coins acquired by individuals—slumped by 32% to 148.2 metric tons in the July-September period compared with a year earlier, while demand in China rose by 18% to 209.6 metric tons.
Oil, at least in WTI terms (NYMEX:CLZ13), will be harder to impress as it knows that we will see a report from the Energy Information Administration that will show a mountain of supply. The Energy Information Administration not only will impact the short term picture but the long term picture as well. The Energy Information Administration reported that U.S. crude oil production actually exceeded crude oil imports for the first time since 1995. Net crude imports hit the lowest level since 1991.
The American Petroleum Institute offered some insight into today Energy Information Administration report by reporting U.S. crude stocks increased by 599,000 barrels. That slightly smaller than expected increase came even with a hefty 1.7 million barrel build in Cushing, Okla. That is probably in anticipation of the TransCanada Pipeline that will soon be moving oil down to Port Arthur, Texas.
RBOB (NYBOT:RBZ13) futures soared as Libya seems to be spinning out of control. Word that Union protestors stopped the loading of an oil tanker seemed to send the Brent Crude on a tear. On top of that mass protest have tried and in one case succeeded in closing down at least 2 refineries.
The uncertainty surrounding supply will have European refiners not as aggressive runs perhaps and Europe may look to the U.S. to fill that void. That comes as U.S. demand is rising and after the API reported that gasoline supply fell again by 1.7 million barrels. Distillate stocks were up a modest 606,000 barrels as well.
Natural gas (NYMEX:NGZ13) is pulling back ahead of today’s inventory! We are looking for a 22 bcf injection. Reuters reported that, “The U.S. Energy Information Administration on Wednesday raised its estimate for domestic natural gas production in 2014, expecting output next year to be up more than 1% from 2013's estimated record-high levels. In its November Short-Term Energy Outlook, the EIA said it expected marketed natural gas production in 2014 to rise by 0.74 billion cubic feet per day to 71.03 bcf per day, which would be the fourth straight annual record.”