After initially leaping higher after the proposed EU ban on Russian oil was released, oil markets have spent the past two sessions consolidating those gains. Overnight, oil traded in a wide and choppy range, but ultimately, Brent crude finished just 0.80% higher at USD 110.95, and WTI rose 0.95% to USD 108.55 a barrel. In Asia, both contracts are almost unchanged in pre-weekend trading.
The news that the US will launch tenders to restock 60 million barrels of oil back into its SPR had no impact on prices overnight. Most likely as the tender exercise won’t start until autumn, an eon in these markets. Similarly, the OPEC+ announcement that it would proceed with its pre-planned 430,000 bpd production increase had no impact either. That is because, with OPEC+ compliance at over 160%, there is zero chance of certain members filling that quota anywhere as production challenges impact Nigeria and other African members.
That leaves oil at the mercy of the Ukraine/Russia conflict and the EU oil ban supporting the downside, while China slowdown fears, with some OPEC members noting much-reduced demand from the mainland, acting as a cap on upside price moves. I still believe markets are under-pricing Ukraine/Russia risks, but that story will have to wait for another day it seems.
Brent crude has formed a triple top at USD 114.75 a barrel, which will be a formidable barrier in the near term. Support lies at USD 103.50 a barrel and I am sticking to my broader USD 100.00 to USD 120.00 a barrel wider range for the months ahead for now. WTI has resistance at USD 111.50 with support at USD 100.00 a barrel. Once again, I remain comfortable with a USD 95.00 to USD 115.00 a barrel outlook in the medium term.
Gold is actually holding up quite well
Like Grace Jones, gold is a slave to the rhythm, in this case, the rhythm of the US dollar. Gold staged quite an impressive rally in early trading yesterday, but as the US dollar soared, it gave back all those gains to finish 0.23% lower at USD 1877.00 an ounce, where it remains in moribund Asian trading.
Still, given the moves seen in other asset classes, gold is holding up reasonably well. It is steady despite US 10-year yields moving above 3.0% once again, and it is definitely outperforming bitcoin right now. That could be coincident with the return of China from holidays, or that there is more than a little risk-hedging based buying quietly going through the market.
Gold looks set to vacillate around its 100-day moving average, today at USD 1881.65, in a wide but real range of USD 1850.00 to USD 1920.00 an ounce, for the time being. Only failure of the break-out triangle apex at USD 1835.00 swings gold back into bearish territory. That said, gold needs to close above resistance at USD 1920.00, and preferably USD 1960.00 an ounce to get the gold bugs excited again. I see more whipsaw trading ranges in the days ahead.
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