WTI Trades Near 3-Day High Before U.S. Supply Data; Brent Steady

                      West Texas Intermediate crude traded near the highest price in three days before supply data that will signal the strength of fuel demand in the U.S., the world’s biggest oil consumer. Brent in London was steady.

Futures were little changed in New York after snapping a five-day losing streak yesterday. Gasoline stockpiles probably fell for the first time since June last week, according to a Bloomberg News survey before a government report tomorrow. Kurdish fighters in Iraq retook northern border towns seized by militants from Islamic State, a breakaway al-Qaeda group, the Kurdistan Democratic Party said on its website.

“It’s been a good driving season,” David Lennox, a resource analyst at Fat Prophets in Sydney, said by phone, referring to the summer period of peak fuel demand. “There is quite a sound floor below the price at the moment.”

WTI for September delivery was at $98.38 a barrel in electronic trading on the New York Mercantile Exchange, up 9 cents, at 2:45 p.m. Sydney time. The contract gained 0.4 percent to $98.29 yesterday, the highest close since July 30. The volume of all futures traded was about 39 percent below the 100-day average. Prices are little changed this year.

Brent for September settlement rose 18 cents, or 0.2 percent, to $105.59 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $7.20 to WTI. It closed at $7.12 yesterday.

Fuel Supplies

WTI declined 4.1 percent last week amid signs of weaker U.S. fuel demand. Gasoline supplies probably fell by 300,000 barrels to 217.9 million during the week ended Aug. 1, according to the median estimate of nine analysts surveyed by Bloomberg before the Energy Information Administration report. The country’s peak driving season typically runs from the end of May to Labor Day on Sept. 1.

U.S. crude inventories shrank by 1.5 million barrels to 365.9 million, the survey shows. Distillate stockpiles, a category that includes heating oil and diesel, expanded by 700,000 barrels.

The American Petroleum Institute is scheduled to release separate supply data today. The industry-funded group in Washington collects data on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the EIA.

Mideast Unrest

Kurdish fighters recaptured Sinjar and Rabia’ah near the Syrian border after heavy fighting yesterday, according to the Kurdistan Democratic Party. At least 50 Islamic State militants were killed as security forces battled to regain the village of Wana, south of Mosul dam.

The conflict has spared supply from Iraq’s south, home to more than three-quarters of its crude output. The nation is the Organization of Petroleum Exporting Countries’ second-largest producer, pumping 3 million barrels a day in July.

In Libya, turmoil could have “negative ramifications on a global scale” if the country continues to spiral out of control, Abu Bakr Bueira, a senior lawmaker told the country’s newly elected parliament yesterday. The nation is the smallest OPEC producer and holds Africa’s biggest oil reserves. - Bloomberg

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Gold Holds Below $1,300 as Easing Debt, Gaza Concerns Cut Demand

                  Gold held below $1,300 an ounce as Portugal’s bailout of Banco Espirito Santo SA reduced concern the lender’s crisis may spread and tension in Gaza eased, damping demand for a haven. Silver rose from a six-week low.

Gold for immediate delivery was at $1,288.99 an ounce at 12:16 p.m. in Singapore from $1,288.25 yesterday, according to Bloomberg generic pricing. The metal fell 0.4 percent yesterday as Portugal’s central bank took control of Banco Espirito Santo, helping the Standard & Poor’s 500 Index rebound from the biggest weekly loss in two years. Bullion fell for a third week in the period to Aug. 1, the longest such slump since September.

Data from the Institute for Supply Management may show today that U.S. services expanded to 56.5 in July from 56 in June, supporting the case for the Federal Reserve to raise borrowing costs. Gold tumbled 28 percent last year on expectations for reduced stimulus in the world’s largest economy. Prices rallied 7.3 percent this year partly on tensions in Ukraine and in the Middle East, where Israel and the Palestinians yesterday agreed to a 72-hour truce in Gaza.

“Interest in gold is fading as U.S. economic data continue to show signs of improvement,” Xia Yingying, an analyst at Nanhua Futures Co., said from Hangzhou, China. “Gold is also losing support from geopolitical tensions.”

Gold for December delivery traded at $1,289.70 an ounce on the Comex in New York from $1,288.90 yesterday. Assets in the SPDR Gold Trust, the largest bullion-backed exchange traded-product, fell 0.2 percent to 800.05 metric tons yesterday after being unchanged for six days.

Silver for immediate delivery rose 0.1 percent to $20.1893 an ounce. Prices earlier dropped to $20.1402, the lowest since June 19, sending the metal’s ratio to gold to 64.4204, the highest since June 18.

Spot platinum increased 0.2 percent to $1,464.75 an ounce, while palladium added 0.2 percent to $857.40 an ounce. - Bloomberg

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Gold Seen Reaching $1,400 by USAGOLD as U.S. Inflation Quickens

                   Gold will extend this year’s surprise rally and climb to the highest price since September on the outlook for accelerating inflation, USAGOLD Centennial Precious Metals Inc. said.

The metal will reach $1,400 an ounce by the end of the year, also supported by higher demand from Asia, Peter Grant, chief market analyst at USAGOLD in Denver said in a telephone interview yesterday. Bullion will climb even if the Federal Reserve increases interest rates, because gains in borrowing costs will probably be accompanied by rising consumer prices, he said.

Gold futures surged 57 percent in the two years through June 30, 2006, as the Federal Reserve raised its benchmark rate to 5.25 percent from 1.25 percent. Interest rates rose as the central bank struggled to contain inflation that accelerated to 4.3 percent, from 3.3 percent. Bullion fell 3 percent in July as the prospect of rising borrowing costs curbed the appeal of the metal as an alternative asset.

“If you look back over time, there are plenty of instances where rates have risen and gold has risen as well,” said Grant, who has tracked the precious metal for 28 years. “Inflation was going up and the Fed was chasing inflation by raising interest rates during that period,” he said, referring to 2004 to 2006.

The metal rallied 7.2 percent this year to $1,288.90 on the Comex in New York partly as violence in Ukraine and the Gaza Strip boosted demand for haven assets. Gold tumbled 28 percent in 2013, the biggest slump in three decades, as signs of accelerating U.S. economic growth raised concern that the Fed’s stimulus would end.

India Imports

The central bank reduced its monthly bond-buying program to $25 billion on July 30, making a sixth consecutive $10 billion cut.

Gold imports by India, the world’s second-largest user, jumped 65 percent in June after the central bank allowed more banks and traders to buy bullion overseas, widening the nation’s trade deficit to an 11-month high.

“I’m primarily looking at the actual physical demand driving prices higher,” Grant said. “I also think inflation is going to pick up a little bit as I anticipate that energy prices are going to rise by year-end as well.”

USAGOLD is a precious-metals dealer. - bloomberg

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