WTI price fell about 1% to trade around 77 USD on Thursday, retreating from 1-month highs amid a global sell off in risk assets driven by concerns over a more aggressive monetary tightening by the Federal Reserve. The latest Fed minutes revealed the central bank discussed reducing its balance sheet, after previously announcing an earlier end to its tapering and signaling three interest rate hikes this year. Sentiment was also dampened after official data showed US fuel inventories surged more than 10 million barrels last week, the biggest weekly build since April 2020 amid falling demand. Meanwhile, investors digested the latest OPEC+ decision to raise oil output by 400,000 barrels per day in February, as the group stuck to existing policy of a modest monthly output increase citing limited impact from omicron on fuel demand.
Gold retreated to below 1,810 USD on Thursday, after reaching a session high around 1,830 USD in the previous day, as the omicron-spurred safe haven buying was offset by a surge in US Treasury yields following hawkish meeting minutes released by the Federal Reserve. Fed officials said that the “very tight” labor market might warrant raising rates sooner than expected, as policymakers seek to tame high inflation. The latest minutes also revealed the central bank discussed reducing its balance sheet in another move to aggressively dial back pandemic-era stimulus. The strong hawkish signals sent the benchmark 10-year US bond yield surging above 1.7%, levels not seen since April 2021. Although investors view gold as a hedge against inflation, higher interest rate raise the opportunity cost of holding non-yielding bullion.