Traders said the drawdown was caused by fewer refinery runs and lower imports.
During this time of year, refineries go into maintenance which causes a drop in demand because less crude is needed to produce gasoline and other fuel products. According to the new data, refinery runs are down to 88 percent of capacity. This trend began in early September.Refineries in the U.S. processed an average of 15.4 million barrels of crude per day. This was down almost 200,000 barrels per day from the average 15.6 million barrels during the week-ending October 7.Declining production in China. China’s crude output fell 9.8 percent to 3.89 million barrels per day, near its lowest in six years in the second-biggest year-on-year decline on record.
The catalysts behind the selling pressure was a combination of overbought technical conditions and warmer-than-normal fall weather. Recently, prices surged on expectations that the winter could produce strong weather-related demand just like the summer heat had. However, it looks as if this rally was premature and doomed to fail without weather cold enough to force consumers to turn on their heaters.As far as the overbought conditions are concerned, the recent rally drew the attention of heavy speculative buyers. However, as open interest rose dramatically, the market eventually ran out of buyers because speculators stopped buying when the market went vertical.
Gold futures rose to a two-week high on Wednesday, driven by a combination of technical and fundamental factors. Technically, momentum is picking up with the completion of a three-day rally. This price action helped push the market on the strong side of the 200-day moving average, which is a potentially bullish signal for long-term investors.Fundamentally, uncertainty over the timing of the next Fed rate hike was supportive. Falling U.S. Treasury yields also boosted prices as well as general worries over the outcome of the next presidential debate on Wednesday and the election on Thursday.The chances for a December Fed rate hike stood at 65 percent, down from 70 percent before the U.S. Consumer Inflation report on Tuesday. This report was considered a disappointment.The direction of prices today could also be influenced by the European Central Bank’s monetary policy decision. The ECB may decide to tweak its current stimulus package.If the ECB decides to increase stimulus then this will be supportive for gold prices. A decrease in stimulus is likely pressure prices.
China’s copper smelting industry will see overcapacity in 3-5 years, Shandong Xiangguang Copper Co.’s Vice President Zhou Songlin told SMM. Copper smelters are suggested to lower cost and improve technology and recycling, he said. Meanwhile, international cooperation will also help them find a way out.
On Wednesday’s night trading, US’s housing start hit an 18-month low but US Federal Reserve’s Beige Book hinted an interest rate hike at the end of year. Inventory of EIA crude oil dipped, helping oil prices get a year-high. LME nickel is expected to meet resistance at the 20-day moving average on Thursday and SHFE 1701 nickel will range between RMB 80,000-82,000/mt.In China’s domestic market, spot nickel should decline to RMB 79,800-81,300/mt on Thursday. Eyes should be on US’s third presidential debates on Thursday.
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