OPEC+ nerves weigh on oil
Oil prices continued to fade overnight, as markets that were already heavily long weighed up the implications of the apparent higher baseline production levels for the UAE. More importantly to markets, though, is whether it will lead to a flurry of demands from other members for similar concessions, leading to the spectre of much higher volumes of oil hitting global markets as growth start to slow in parts of the world. OPEC’s monthly report overnight lifted its consumption forecast to above pandemic levels for 2022, but oil prices refused to halt their downward move.
Brent crude fell 1.70% to USD 73.25 a barrel, which WTI retreated by 2.0% to USD 71.45 a barrel. Both are unchanged in Asia, with regional markets content to remain on the sidelines as the week closes out. The threat of weaker OPEC+ cohesion and higher than anticipated production will cap oil price gains for now. Brent crude has support at USD 72.00 a barrel, and failure could see a speculative capitulation trade occur, although I expect its duration to be short, if brutal. WTI’s line in the sand remains at USD 70.00 a barrel, and I expect some similarly ugly stop-loss selling to occur if it fails.
Oil markets will remain on edge until OPEC+ baseline clarity emerges, and the virus situation in Asia shows material signs of stabilising.
Gold holds above the 200-day moving average
Gold finished modestly higher overnight, with dips well-supported intra-day despite a generally stronger US dollar. A further fall in US bond yields helped its cause, and gold continues to show positive technical signals that more gains lie ahead.
Although gold finished the overnight session only 0.12% higher at USD1829.50 an ounce, it recorded its second consecutive daily close above the 200-day moving average (DMA), at USD1827.00 an ounce. In Asia, gold has eased to the USD1827.00 support in generally moribund trading, with regional investors eyes elsewhere.
Gold has support at USD1820.00 and USD1800.00 an ounce, with the bullish outlook intact as long as the 100-DMA at USD1792.00 holds on a closing basis. Gold’s next upside targets are USD1845.00 and USD1860.00 an ounce, although I expect this to be a slow grind higher like previous sessions this week.