Oil rallies in Asia

Oil prices continued falling overnight as China slowdown nerves and increasingly, US recession fears weighed on prices. In Asia, we have seen a sharp bounce as energy markets price in most China stimulus after benign inflation data, with Ukraine gas disruption likely having a flow-through impact on oil prices.

Overnight, Brent crude finished 3.55% lower at USD 101.50, and WTI closed 3.45% lower at USD 99.00 a barrel. Prices have jumped in Asia with Brent crude rallying by 3.30% to USD 104.80, and WTI leaping 3.10% higher to USD 102.05 a barrel. I suspect the gas disruptions in Ukraine are having a steadily increasing impact, as hopes of more China stimulus alone would not just the bounce we have seen today. As a result, I see more upside to oil prices in Europe this afternoon. US Natural Gas has moved 2.50% higher today, after rallying 4.0% higher overnight.

Brent crude has formed a triple top at USD 114.75 a barrel, which will be a formidable barrier in the near term. It has support at USD 101.50 a barrel. I am sticking to my broader USD 100.00 to USD 120.00 a barrel wider range ahead for now. WTI has resistance at USD 111.50 with support at USD 98.50 a barrel. Once again, I remain comfortable with a USD 95.00 to USD 115.00 a barrel outlook in the medium term.

Gold looks shaky

Gold’s price action can only be described as negative overnight. Despite lower US yields and a sideways US dollar, gold fell by 0.84% to USD 1838.50 an ounce, taking out support at USD 1850.00. In Asia, gold is unmoved from the New York close with little interest from regional players ahead of US inflation data.

Gold is now just above the triangle apex at USD 1835.00, the breakout of which in early February, signalled the gold rally to USD 2060.00 an ounce. A daily close under USD 1835.00 would be an ominous technical development although it must be said, gold’s recent price action suggested downside risks were in play.

Failure of USD 1835.00 sets up a test of support at USD 1820.00 and then potentially USD 1780.00 an ounce. Failure of the latter suggests a deeper correction to USD 1700.00. Gold has resistance at USD 1850.00 and USD 1882.00 an ounce, its 100-day moving average. I foresee more whipsaw trading ranges in the days ahead.

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