Another volatile night for oil
It was another night of wild tail-chasing moves in oil trading with very wide ranges as markets were buffeted by omicron sentiment and headlines. Oil has become strictly a day traders’ market now. Markets ignored the US official crude inventory data, focusing on the California omicron case and oil finished lower for the day. Brent crude fell 1.70% to USD 68.95 a barrel, and WTI retreated 1.90% to USD 65.70 a barrel.
Today, some soothing comments by Dr Anthony Fauci have lifted US equity futures and seen FOMO buyers emerge in Asian oil markets. Brent crude and WTI rising 1.10% to USD 69.70 and USD 66.40 a barrel. We are but one negative headline on omicron wiping that gain out as quickly as it appeared, though.
With panicked tail-chasing blowing out volatility this week, the full OPEC+ meeting tomorrow has not come soon enough, with oil’s intraday price action now bordering on juvenile, and fair-weather algo “market-maker” liquidity doing what it always does in financial markets when volatility spikes, disappearing. Yesterday’s first day of OPEC+ was a strictly administrative one, with the main event coming later today. I believe that the collapse in oil prices, and the great unknowns surrounding meaningful facts and omicron, will see OPEC+ call a temporary halt to production increases. That may restore a modicum of stability to oil markets.
Technical levels and indicators are fairly useless in markets such as this, driven by panicked swings in investor sentiment and low liquidity. However, for what it is worth, the relative strength indexes (RSIs) on both Brent and WTI are now heavily oversold, indicating markets are vulnerable to a short squeeze. The week’s lows at USD 67.50 and USD 64.50 mark the first decent technical support.
Gold has another underwhelming day
Gold’s price action continues to be unimpressive. Despite trading in a USD 22.0 an ounce range, gold finished the day just 0.40% higher at USD 1782.00. There are zero signs of any safe-haven bids emerging to shelter from virus volatility, and it is falling despite both US yields and the US dollar also falling. Gold has now recorded its 4th successive daily close below its 50,100 and 200 DMAs clustered between USD 1791.00 and USD 1792.20 an ounce, yet another bearish signal.
Gold tested and failed ahead of USD 1800.00 overnight, with the moving averages and USD 1815.00 forming plenty of resistance levels. The week’s low at USD 1770.00 an ounce, has traced out a double bottom support level. Failure of USD 1770.00 now signals a retest of USD 1760.00 and USD 1740.00 an ounce. I do not rule out a move lower to USD 1720.00 this week, especially if the Non-Farms puts the Fed taper front and centre.
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