Oil rally eases but outlook remains bullish
Oil’s rally has stalled in recent days just as Brent was closing in on USD 80. A number of factors have contributed to crude prices pulling back including surprise inventory builds from API and EIA, a stronger dollar and more risk aversion in the markets. It’s also impossible to ignore just how close Brent came to USD 80 which suggests there’s a strong element of profit-taking in there as well.
The outlook for oil prices remains bullish despite an almost 4% correction so far. The key test below comes around USD 75 in Brent and USD 73 in WTI but we’re still a little away from there at the moment. Ultimately, the energy crisis is only going to further support the rally in oil prices and the pressures here are certainly not easing up yet.
OPEC+ could take some heat out of the market next week but I struggle to see them doing so. With so much uncertainty still existing, I think they’ll view prices as acceptable for now and potentially be tempted into accelerating production over the coming months if some downside risks to demand don’t materialise. Much to the annoyance of the White House, no doubt.
Gold support may be short-lived
Gold has finally found some support on Thursday after falling as low as USD 1,720 a day earlier. Some profit-taking in the dollar may have brought some reprieve to gold, which is up around 12 dollars on the day to trade a little shy of USD 1,740. Any rallies are likely to face significant resistance though, especially around current levels, with them being important previous areas of support.
Momentum has eased a little during the recent declines in gold but there’s still plenty there which may suggest any rallies will be short-lived for now. We’re fast approaching major levels of support, with USD 1,700 being a big psychological test and USD 1,680 long-term support.
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