Oil up on API inventories, gold steady

Oil markets supported by surprise API drop

The near three-week sideways consolidation continued for oil overnight, with yet another directionless range-trading session. The gentle risk aversion seen elsewhere was offset by a large surprise fall in US API Crude Inventory stocks overnight. The net result left oil almost unchanged. Brent crude edging 0.13% higher to USD56.00 a barrel, and WTI fell 0.23% to USD52.35 a barrel. Oil markets are sharply unchanged in Asia today.

The FOMC presents a binary outcome for oil prices this evening in the short-term. A dovish FOMC and a positive economic assessment from them should be enough to break oil out of the top of its January range. Conversely, an FOMC that delivers a mini-taper tantrum will likely see oil fall through the three-week support and wash out speculative long positions. If official US Crude Inventories follow the API numbers by dropping strongly, that should limit the damage of any FOMC-induced downside move.

In the bigger picture, oil continues consolidating at the top of the range of its rally from the November lows. The Saudi Arabian cuts, OPEC+ compliance above 85.0% and an insatiable demand from Asia means that oil has seen its cyclical lows for 2021.

Brent crude is bound by resistance at USD56.60 and USD57.40 a barrel, with support at USD54.50 a barrel. WTI has resistance at USD54.00 a barrel, and support at USD51.60 a barrel. Clearance of those levels, either way, will signal oil’s next directional move.

Gold remains cemented in place

Gold had a moribund session overnight, edging lower by 0.25% to USD1851.00 an ounce, with daily ranges continuing to compress. Asia has been just as quiet as precious metals markets await tonight’s FOMC. Gold has nudged 0.15% lower to USD1847.00 an ounce in this morning’s session.

Gold has resistance at USD1875.00 an ounce, followed by the 100-day moving average (DMA) at USD1881.40 an ounce. Modest support appears nearby at the 200-DMA at USD1847.50, followed by USD1837.00 an ounce. The January 18th spike follows that at USD1802.50 an ounce.

With the 100 and 200-DMA’s slowly but surely converging, a large directional move by gold is in the offing. Unfortunately, the charts give no hint as to which way that move will be. The FOMC decision and the press conference after should resolve that. Depending on the FOMC’s dovishness, or not, gold could be either USD1800.00 or USD1900.00 an ounce by tomorrow morning.

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