Oil trades sideways overnight
Oil prices had another choppy session overnight but ultimately traded sideways, booking just modest losses. Markets remain torn between recession fears in the US, Europe, and China torpedoing growth and thus, oil consumption, and the still very tight supply/demand reality of the physical market. Little hope is being assigned to Biden’s visit to Saudi Arabia unlocking more production from it or the UAE. The price is likely to be very high to achieve that.
Brent crude finished 0.70% lower at USD 106.25 overnight, while WTI fell 1.30% to USD 103.35 a barrel. News that a court in Russia has overturned the environmental ban at the Kazakh’s Black Sea terminal in Russia, has sent oil prices slightly lower in Asia. That is likely to be temporary given the Russian judicial system, and it seems that China’s lockdown fears are keeping oil prices offered in Asia. Brent crude is 0.80% lower at USD 105.35 a barrel, with WTI falling by 1.10% to USD 102.30 a barrel.
Reports that Iran is about to sell hundreds of drones, some armed, to Russia could be a body blow to any nuclear deal with the west. That means that the chances of Iranian crude returning legally to international markets in greater volumes is receding and could prove supportive of prices as the day goes on.
Brent crude has resistance at USD 107.50 and then its 2022 trendline breakout at USD 108.85, followed by the 100-day moving average (DMA) at 110.75. It has traced double bottom at USD 103.75 and USD 98.60, followed by the 200-day moving average (DMA) at USD 96.75 a barrel. WTI has resistance at USD 105.00 and then its 100-DMA at USD 107.50 a barrel. Support is at USD 101.00 and then USD 96.60.
Gold is soggy in Singapore
The wholesale retreat of investor sentiment overnight saw massive inflows into the US dollar, pressuring gold once again. Gold fell 0.50% to USD 1734.00 an ounce overnight. In Singapore, gold has had a choppy USD 1723.00 to USD 1744.00 range this morning and appears to be trading tick-for-tick with movements in EUR/USD today. As such, a break of parity by EUR/USD will signal a test of USD 1700.00 by gold. As I write, gold is down by 0.30% to USD 1729.00 an ounce in Asia.
Since breaking USD 1780.00, gold’s technical picture has deteriorated rapidly, and it is clear it remains at the mercy of the US dollar’s direction. The only positive note to be seen is that its RSI is now in very oversold territory, allowing for a modest corrective rally to occur if a downward correction in the US dollar happens. Despite four sessions of sideways trading, gold remains anchored at the bottom of its range and only a miracle slump by the US dollar this evening is likely to move it off the seafloor.
Gold has resistance at USD 1780.00, USD 1785.00, and USD 1820.00, its downward trendline. Support is at USD 1720.00, followed by USD 1675.00. Failure of longer-term support at USD 1675.00 sets in motion a much deeper correction, potentially reaching USD 1500.00 an ounce.
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