Oil up ahead of OPEC+, gold under pressure

OPEC+ speculation lifts oil prices

Oil prices rose last night, ignoring a record increase in official US Crude Inventories of a monumental 21.56 million barrels. That was offset partially by a 13.62-million-barrel drop in gasoline stocks, and clearly, the weather disruptions in Texas and neighbouring states are reflected in the data.

After Reuters published a story suggesting the OPEC+ may now not wind back production cuts at their meeting today, oil prices moved higher. That sent prices flying, and Brent crude finished the day 2.35% higher at USD63.90 a barrel, WTI climbing by 2.70% to USD61.05 a barrel.

Asia markets have continued to rally, in line with the cyclical rotation seen in equity markets, the Reuters story and news that the Yemeni Houthis had fired a missile at a Saudi facility in Jeddah. Brent crude and WTI are both 1.15% higher at USD64.60 and USD61.75 a barrel, respectively.

The Reuters report has introduced a binary outcome to today’s meeting, and I will not try to second-guess OPEC+. I do note that they have surprised us before and that if no change is forthcoming today, it will undoubtedly be on the table from next month.

Brent crude has resistance at USD66.00 and USD68.00 a barrel, with support at USD62.00 and USD60.00 a barrel. WTI has resistance at USD62.00 and USD64.00 a barrel, with support at USD59.40 and USD58.60 a barrel. With positioning now less balanced towards increased OPEC+ supply, if they do go ahead, oil should spike lower. I believe that any spikes lower will be short-lived, however.

 

Gold is singing in the Bit-November rain

The rise in US bond yields put a quick stop to the nascent gold recovery overnight. Gold fell 1.60% to USD1711.00 an ounce. Ironically, Bitcoin continued to power higher, rising back through the USD50,000 mark. For now, it seems cryptos are eating gold’s inflationary hedge lunch.

Gold has crept a few dollars higher in Asia, rising to USD1715.00 an ounce, but is still gasping for air. The technical picture for gold looks awful now. It has fallen through long-term support at USD1760.00 an ounce, and then attempted, but failed, to reclaim it. Rallies are currently limited to USD1740.00 an ounce, which is now a double top. In fact, gold came perilously close to tracing out a bearish outside reversal day overnight.

Gold has support at USD1702.00 an ounce, the overnight low. That is followed by the 61.80% Fibonacci of the March to August 2020 rally at USD1689.00 an ounce. If bond yields move higher over the next two days, gold will almost certainly fail at the latter, opening further losses targeting the USD1600.00 region. Oversold short-term technical indicators are gold’s only glimmer of light now, but I suspect they will fade quickly.

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

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