Official US EIA data showed an unexpected drop in commercial crude stocks by 200 thousand barrels last week to 430.6 million barrels, while analysts expected an increase of 600 thousand barrels. 

Gasoline stocks fell 2.4 million barrels to 212.2 million barrels last week, while distillate stocks fell 2.9 million barrels to 114.4 million barrels. 

Earlier US data showed pending  home sales fell for the third month in a row. 

Pending home sales rose 2% m/m to 88.4 in August, while analysts expected a 0.9% drop, as sales fell 24.2% y/y. 

Oil prices rose in European trade for the second day off eight-month lows amid concerns about global supplies as US output slows down following heavy storms in the Mexican Gulf. 

Prices were also buoyed by expectations OPEC Plus might cut output to support prices, which overcame the impact of higher US crude inventories. 

Global Prices

US crude rose 2.3% to $79.73 a barrel, while Brent added 1.4% to $87.25, with a session-low at $84.31. 

US crude rose 2.2% on Tuesday, while Brent rose 2.1%, the first profit in three days off eight-month lows. 

US Output

The US shutdown maritime oil rigs that pump 190 thousand bpd, or 11% of the region's output, due to current storms. 

Major oil companies BP and Chevron were forced to close production in maritime rigs in the Mexican Gulf amid approaching storms.

The Mexican Gulf represents 17% of total US crude output, which topped at 12.1 million bpd recently, a two-year high.

OPEC Plus

Iraq's oil minister said today that OPEC Plus is monitoring prices closely and is seeking to rebalance them.

Such statements paved way for forecasts the oil cartel might cut output this year to maintain balance.

US Inventories

Initial US data showed commercial crude stocks rose 4.2 million barrels in the week ending September 23, the fifth increase in a row, blowing past estimates of a 0.5 million barrels increase. 

Total stocks now are up to 443 million barrels according to the initial data, the highest since the week ending July 16, 2021, in a sign for weak demand in the US.

Gold prices fell in European trade to 29-month lows, resuming losses and heading to $1,600 as the dollar climbed to fresh 20-year highs against a basket of major rivals. 

Investors are still focused on the greenback after a new spike in long-term US treasury yields and following bullish remarks by Fed officials. 

Prices Today

Gold prices fell 0.9% to $1,614.79 an ounce, the lowest since April 2020, after rising 0.4% yesterday, the first profit in four days on short covering. 

The Dollar

The dollar index rose over 0.5% on Wednesday for the fourth straight session, hitting fresh 20-year highs at 114.77 against a host of major rivals. 

A stronger dollar weighs heavily on dollar-denominated commodity futures. 

US Yields

US 10-year treasury yields rose 1.9% on track for the third profit in a row, hitting 4.019%, the highest since October 2008, in turn pressuring non-yielding gold futures. 

The developments came after strong US consumer sentiment data and after a stream of bullish remarks by Fed officials. 

Fed Remarks

 Minneapolis Federal Reserve Governor Neil Kashkari said the Fed members are united in making what's necessary to control inflation in the country. 

Fed members expect interest rates to rise to between 4.50% and 4.75% to be optimal for inflation control. 

Estimates

We here expect gold prices to keep trending lower, hitting fresh 29-month lows and heading towards $1,600. 

The SPDR

Gold holdings at the SPDR Gold Trust fell 2.61 tones yesterday, the eighth decline in a row to a total of 940.86 tones, the lowest since March 2020.