Oil slides on Covid fears, gold ranges

Oil prices collapse overnight

A souring outlook for the global recovery as Covid-19 fears resurface, and it appears there is still plenty of speculative long positioning out there, contributed to another rout for oil markets overnight. Brent crude fell 6.0% to USD60.40 a barrel, and WTI fell by 6.40% to USD57.30 a barrel.

Oil has gained a reprieve in Asia with news that a ship has run aground and is blocking the Suez Canal. The potential disruption to supplies has lifted prices on both contracts by 1.0% today. The reprieve seems temporary, though, as the spot price fall overnight has completely removed the backwardation in the oil futures market for prompt deliveries. With speculative markets still long, it seems, oil is likely to be a sell on rallies until Covid-19 and economic recovery sentiment swings back into the black.

The falls overnight will put paid to any chance that OPEC+ will trim production cut targets, and their next meeting in April will seem like an age away. Overall, I regard the fall as a very deep correction, and remain optimistic that both the economic recovery, and by default, oil’s longer-term rally remains on track. There may well be more pain in the short-term to endure, however.

Brent crude has support at USD60.30 and USD60.00 a barrel. Failure opens deeper losses to USD57.50 a barrel. Resistance is now far distant at USD65.00 a barrel. WTI has a triple bottom at USD57.35, and failure sets the scene for deeper losses to USD55.00 a barrel. Resistance is at USD60.00 and USD62.50 a barrel.

 

Gold ranges quietly

Gold appears to be off most investors’ radars at the moment, the US dollar strength overnight pushing it slightly lower by 0.70% to USD1727.00 an ounce. The risk aversion sweeping Asian markets has seen it regain most of those losses, rising 0.40% to USD1733.00 an ounce.

With gold seemingly immune to higher US yields, lower US yields, and US dollar strength, it seems set to continue ranging between USD1720.00 and USD1750.00 an ounce, as part of a broader longer-term bottoming pattern. It will be interesting to see if it has recovered some of its forgotten risk-aversion mojo in the days ahead.

Gold’s overall price action remains construction, though, and the yellow metal is attempting to form a longer-term base, between its 61.80% and 50.0% Fibonacci retracements, setting the scene for a move back above USD1800.00 an ounce if all goes to plan.

Gold has support at USD1720.00 and USD1700.00 an ounce, followed by the 61.80%retracement in the USD1685.00 area. It has initial resistance at USD1755.00 an ounce, followed by the 50.0% retracement at USD1760.00 an ounce.

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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