Oil slides on OPEC+ and Iran, gold steady

Oil collapses on OPEC+ and Iran nerves

With the backwardation in the oil futures curves having vanished into thin air, it was odd that OPEC+ decided to open the taps from May. Although the reaction was modest on a holiday-thinned Friday, investors voted with their feet overnight, sending Brent crude 3.70% lower to USD62.25 a barrel, and WTI 4.05% lower to USD58.80 a barrel. Short-covering this morning in Asia has seen both contracts add 0.75% to USD62.70 and USD59.30 a barrel, respectively.

Although some bargain hunting has supported prices today, its longevity is suspect. With deteriorating Covid-19 situations in Europe and especially India, consumption is sure to take a hit. Additionally, India is taking a leaf out of China’s book and flexing its buying power muscles with Saudi Arabia, its biggest supplier. Saudi Arabia has raised prices to Asian customers overnight, but India seems intent on increasing buying from alternative sources. That may have the effect of eroding OPEC+ discipline going forward.

Nagging fears of increased Iranian supply also persist, with increased Iranian exports, by foul means or fair, in no small part of the reason oil’s rally has run out of steam. A breakthrough in the US-Iran indirect talks in Vienna this week will almost certainly lead to another decisive move lower by oil markets, as fears of more Iranian supply increase.

Brent crude’s resistance is distant at USD65.50 a barrel after the overnight fall, with support at USD62.00 and USD61.30 initially, followed by the March low at USD60.30 a barrel. WTI has well-denoted resistance at USD62.00 a barrel with support at USD58.65, followed by the March lows at USD57.30 a barrel.


Gold trades sideways

Gold traded sideways overnight, following two impressive daily rallies previously. Given the amount of bullish risk sentiment sweeping US markets overnight, the fact that gold didn’t fall can be taken as a win for long-suffering bullish investors. Undoubtedly a weaker US dollar and slightly lower US yields were supportive, but gold continues to show resilience after testing and rallying from long-term support last week.

Overnight, gold edged 0.10% lower to USD1728.00 an ounce, before rising 0.30% to USD1733.50 an ounce in Asian trading this morning. Although gold has traced a double bottom near USD1680.00 an ounce, further reinforcing the longer-term bottoming formation of prices on the charts, gold needs to rally through USD1755.00 an ounce to confirm a structural low is in place.

Gold has support at USD1720.00 and USD1705.00 an ounce, followed by the long-term support region between USD1675.00 and USD1685.00 an ounce. Resistance is at USD1745.00 and USD1755.00 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, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was 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 and Channel News Asia as well as in leading print publications such as 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)