Oil eyes OPEC+, gold rangebound

Oil grinds higher ahead of OPEC+

Oil is almost unchanged in Asia today, albeit firmly anchored at the highs of last week as prices once again ground higher on Friday. Brent crude rose 0.77% to USD 76.10 a barrel, and WTI rose 0.93% to USD 73.95 a barrel, where both remain today.

The US infrastructure package progress gave oil another leg-up last week, and the Baker Hughes Total Rig Count came in unchanged at 470 rigs on Friday evening. That suggests that a sudden resurgence by US shale remains as distant as ever, and this is underpinning oil prices as OPEC+ discipline remains high. With Iranian talks moving to the backburner, the focus will be on OPEC+ this week. With US shale side-lined, OPEC+ will likely see an opportunity to raise production once again, with any fallout on prices likely to be limited.

That may cap oils advances this week, though, especially as both Brent crude and WTI’s relative strength indexes (RSIs) remain in very overbought territory. I doubt we will see Brent crude traded at USD 78.00, WTI at USD 76.00 a barrel this week in that context, with both vulnerable to a sharp correction lower as the week moves on.

Any washout of speculative long positions should be short in duration, as oil’s physical fundamentals remain very supportive. Thus, Brent crude could correct to near USD 73.00, and WTI to USD 70.00 a barrel. Unless OPEC+ massively opens the taps next week, however, any selloff will be short-lived.

Gold remains rangebound

Gold once again probed the topside of its range on Friday, only to fade ahead of its 100-day moving average (DMA). Still, it did manage to finish 0.40% higher at USD 1781.50 an ounce, supported by weekend risk-hedging. It appears those risk-hedges have been unwound this morning, with gold falling briefly to USD 1770.00 before rebounding to be almost unchanged at USD 1781.00 an ounce.

Gold remains locked in a USD 1760.00 to USD 1800.00 an ounce range, with the 100-DMA today at USD 1793.50 an ounce, capping gains. As ever, gold’s fate will be decided by other markets, notably the US dollar’s direction. The RSI has moved back into neutral territory, removing one source of support. Its failure ahead of the 100-DMA on Friday suggests this week; gold will be more vulnerable to downside risk than last.

In the bigger picture, gold needs to complete a daily close above USD 1800.00 an ounce or below USD 1760.00 an ounce to signal its next directional move. Otherwise, patience is required in a range trader’s market.

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