Crude oil prices roared higher after EIA inventory data showed stockpiles shed 3.64 million barrels last week, marking a stark departure from an analogous API report that reported a small build over the same period. The move higher proved short-lived however as risk appetite soured after the White House tax reform proposal failed to impress. The WTI benchmark retreated alongside stock prices, erasing prior gains to finish the day little-changed.

The US administration released a plan closely aligned with preliminary speculation. In essence, it wants to reduce tax rates while broadening the base by eliminating most itemized deductions. The plan was relatively vague on implementation details. Importantly, there appeared to be nothing to win support from deficit hawks in the legislature. Investors seemed to take this to mean that the ambitious overhaul may suffer the same fate as the aborted AHCA healthcare reform bill.

Not surprisingly, gold prices rose as the markets digested the Trump team’s proposal. Cutting taxes was to be a key part of an expansionary fiscal posture that would buoy inflation and push the Fed to hike interest rates more aggressively. Apparent skepticism about the scheme’s legislative future has turned this logic on its head, with Treasury bond yields declining and the priced-in rate tightening path implied in Fed Funds futures flattening after its announcement hit the wires.

Asian stock exchanges managed tepid gains but European bourses are facing heavy selling pressure in early trade. The downbeat mood has spared US stock index futures thus far. If risk aversion spreads market-wide, a drop in bond yields may see gold recover further. A round of soft US economic statistics including durable goods orders and pending home sales may also help the yellow metal’s cause. Meanwhile, a gathering of oil industry bigwigs in Paris may bring headlines about on-coming supply trends.