Headless chickens rule oil markets
Brent crude and WTI finished on moderately lower overnight, but that belied the aggressive intraday price action with both contracts falling over USD 3.00 a barrel intraday. The intraday capitulation reversed leaving Brent crude 1.20% lower at USD 72.10, and WTI 1.60% lower at USD 69.20 a barrel. In Asia, the slight rebound in sentiment has seen both contracts add 10 cents a barrel.
Although the short-term outlook for oil is being sunk by negative virus and US legislative sentiment, we should not discount OPEC+ from the equation. OPEC+ left their last meeting open precisely to manage this type of situation. If Brent crude continues to head south from here, I wouldn’t discount OPEC+ stepping in to roll back their recent production increases. Given that compliance is over 100%, this would process would be easy to achieve right now.
Brent crude has resistance at USD 72.50 and then the 200-DMA at USD 73.20 a barrel. Support is at USD 69.00 a barrel. WTI has resistance at USD 69.40 and then the 200-DMA at USD 70.50 a barrel. Support lies at USD 66.00 a barrel.
Gold range trade continues
Gold edged lower overnight as momentum once again faded, leaving the yellow metal 0.40% lower at USD 1790.50 an ounce. In Asia, the recovery in sentiment has lifted it 0.10% higher to USD 1792.30 an ounce.
Gold’s attempts to stage a meaningful recovery continue to disappoint, with traders cutting long positions at the very first sign of trouble intra-day. Gold lacks the momentum, one way or another, to sustain a directional move up or down. Likely, gold will remain a forgotten asset class and face another week of choppy range trading.
Gold has formed a rough double top around the USD 1815.00 region which will present a formidable barrier at USD 1840.00. Support lies at USD 1790.00, followed by USD 1780.00 an ounce. USD 1790.00 to USD 1815.00 could well be the range for the week.
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