APAC Commodities – The Good, the Bad and the Ugly

Oil long positions culled after an ugly drop; gold continues to drift ahead of the weekend’s election.

OIL

Both Brent and WTI collapsed some 4% overnight in a straight line. Brent spot trading below  53.00 and WTI spot touching 50.00 a barrel before both made an asthmatic recovery top open in Asia at 53.15 and 50.65 respectively. The blame is being laid on the EIA Crude and Gasoline Inventory numbers, which showed a less than expected crude draw, and a surprise 1.5 million barrel rise in gasoline stocks.

While there is no doubt that the numbers opened the floodgates, I would argue, as per yesterday’s comments, that main reason was the culling of the extreme short term long positioning in both contracts. The buildup of speculative longs on the previous week’s geopolitical tensions saw a lot of traders trying to get through a very small fire exit door at once.

Brent spot has support at 52.50 with resistance at 54.00. WTI has support at 50.00 initially and then 49.50, with resistance 51.50. A break of the lower levels in either contract potentially opening up another ugly evacuation of longs to the downside.

GOLD

As President Trump’s armada sailed off to Australia and not the Korean peninsula overnight, Gold traded slightly lower on the easing of tensions. However, with this weekend’s French Presidential vote event risk, it is hard to see gold forming a meaningful correction to the downside before next week at the earliest. Safe haven buying should continue to support any dips.

Gold opens mid-range at 1279 in Asia with support at 1270 and then 1260.

Resistance lies at 1292 and then 1296 initially. A series of lower highs on the topside would not be constructive from a technical perspective, but the aforementioned event risk and a generally tepid U.S. dollar should offset this.

Heading into next week, assuming no surprises in France this weekend, the picture for gold and other precious metals may well change.

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