Oil prices bounce
Oil prices rose on Friday and Brent crude and WTI has unwound most of early last week’s losses. The futures curves remain in very firm backwardation and in the real world, supplies are as tight as ever with increasing risks around Russia and European natural gas exports. As I said last week, we are unlikely to see Brent crude below USD 100.00 in this environment, whatever noise we are hearing from other asset classes. OPEC should be a non-event this week, having increased production slightly last month. A potential full loss of Ecuadorian production is having no impact on markets today.
Brent crude rose by 2.55% to USD 112.40 on Friday, gaining 0.75% to USD 113.30 a barrel in Asia. WTI rose by 3.45% to USD 107.50 on Friday, edging 0.15% higher to USD 107.70 a barrel in Asia.
Notably, Brent crude tested and held its rising longer-term support line, today at USD 107.70, in the early part of last week. It did not reach the 100-day moving average DMA either. That is a technical development that should be respected and talk emerging from the G-7 about a cap on Russian oil prices, is likely to be more supportive of Brent crude over WTI.
WTI’s technical picture continues to look the more vulnerable. Having closed below its rising 2022 support line and its 100-DMA last week, the rally on Friday has only lifted it back to this region today. The support line is at USD 107.10, with the 100-DMA at 105.85 a barrel. Although the worst may be over for the WTI sell-off as well, we can’t rule out more corrections lower this week. It has resistance at USD 110.00 a barrel.
Gold rises on Russian gold ban
Gold rose with general investor sentiment on Friday, as the US dollar eased. It ground out a modest 0.25% gain to USD 1827.50 an ounce, adding another 0.45% to USD 1835.50 an ounce in Asia today. The gains today have been driven by a G-7 announcement of a formal ban on Russian gold imports. In reality, this is a mere rubber-stamping exercise of unofficial policies already in place and is unlikely to meaningfully change the outlook for gold. â It remains adrift in the month-long USD 1800.00 to USD 1880.00 range.
Gold has resistance at USD 1860.00 and USD 1880.00, the latter appearing an insurmountable obstacle for now. Support is at USD 1805.00 and then USD 1780.00 an ounce. Failure of the latter sets in motion a much deeper correction, potentially reaching USD 1700.00 an ounce. On the topside, I would need to see a couple of daily closes above USD 1900.00 to get excited about a reinvigorated rally.
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