Oil surges on OPEC deal, gold choppy

Oil prices rocket on OPEC+ surprise

OPEC+ sprung a massive surprise on energy markets overnight, granting a tiny increase in production to Russia and Kazakhstan, but wrong-footing markets by announcing a unilateral cut by Saudi Arabia of one million barrels per day. That actually leaves markets with less oil per day than before the OPEC+ meeting and casts Saudi Arabia as a source of monthly volatility going forward.

The magnanimous gesture by the Saudis could be aimed at maintaining OPEC+ discipline. By cutting production and lifting prices, the Saudis can take the pressure off weaker members’ budgets. That will help ensure compliance and discipline and loyalty.

Iran’s seizure of a South Korean oil tanker for “environmental violations” is a clumsy attempt to extort USD7 billion of frozen Iranian funds from Seoul. It does add uncertainty to the situation in the Straits of Hormuz, another positive for oil prices. Clearly, enriching uranium to 20% is an expensive business.

Oil prices rocketed higher after the OPEC+ announcement. Brent crude rose 5.45% to USD53.50 a barrel and WTI rose 2.45% to USD49.80 a barrel. Today in Asia, oil has climbed again, Brent increasing 0.70% to USD53.90 a barrel, and WTI rising 0.50% through the USD50.00 a barrel mark to USD50.05 a barrel. That leaves both contracts at 9-months highs, levels last seen just before the Covid-19 capitulation slump.

With supplies now being squeezed, both contracts have every chance of maintaining their impressive two-month price gains, as the world recovery continues to accelerate. Brent crude’s next target is USD60.00 a barrel, with only a retreat through USD50.50 a barrel calling the rally into question. WTI, having broken through the USD50.00 a barrel barrier, should now target USD55.00 in the weeks ahead. Critical support is distant at USD47.00 a barrel.

 

Gold consolidates recent gains

Gold contented itself with choppy range trading overnight, finishing 0.37% higher at USD1950.00 an ounce as the US dollar retreated across the board. Today in Asia, gold has eased 0.25% lower to USD1945.50 an ounce in directionless trading.

Gold has clear technical support at USD1900.00 an ounce and USD1895.00 an ounce, the 100-day moving average. Unfortunately, given the rally yesterday’s pace, there is nothing but clear air between USD1900.00 and its current level. A series of highs between USD1965.00 and USD1975.00 an ounce denotes initial resistance, followed by USD2000.00 an ounce, where I expect heavy option-related selling to cap gains initially.

I expect gold to trade in a noisy USD1910.00 to USD1960.00 an ounce range over the next 24 hours as we await the Georgia Senate runoff outcome.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

Latest posts by Jeffrey Halley (see all)