Oil rises on supply disruptions, gold slides

Oil rallies impressively

As mentioned yesterday, oil’s price action is bullish, as it shrugged off a series of seemingly bearish news inputs over the last 48 hours. That news swung the other way overnight, with domestic protests disrupting local production, and with the arrival of Russian paratroopers to restore order. Libya is also struggling to maintain production due to maintenance issues.

That saw oil prices soar overnight, with Brent crude climbing 2.40% to USD 82.00 a barrel, and WTI rocketing 3.20% higher to USD 79.65 a barrel. Additionally, the backwardation of the oil futures curve has started widening once again, implying that prompt demand is robust. In Asia, the rally has continued, driven by Kazakhstan nerves (1.6 million bpd), Brent crude climbing 0.60% to USD 82.50, and WTI rising 0.50% to USD 80.00 a barrel.

Brent crude has support at USD 79.60 and the 100-day moving average (DMA) at USD 78.00 a barrel.  It has resistance nearby at USD 83.00 a barrel and could retest USD 86.00 next week.  WTI has support at USD 78.50 and USD 77.50 a barrel. Having captured USD 80.00, a weekly close above here this evening signals more gains targeting USD 82.00 and potentially USD 85.00 a barrel.

 

Gold continues to fade

With US yields and the US dollar holding their gains but trading sideways, gold gave way overnight, slumping 1.07% to USD 1790.85 an ounce as the bulls, once again, threw in the towel. Given the price action overnight, it appears that gold is still vulnerable to higher US yields and a higher US dollar. Any rallies should be approached with a great deal of caution and scepticism.

Gold has recovered slightly to USD 1792.50 an ounce in Asia, but it looks very much like a dead cat bounce. It is relying on a weak US Non-Farm Payroll print tonight to salvage the situation. USD 1790.00 to USD 1820.00 remain my calls for the weekly range, but clearly, the downside has become the weaker side. Gold has resistance at USD 1810.00 and USD 1830.00 an ounce, although it would be a huge surprise if we saw those levels today. Support lies at USD 1785.00, followed by USD 1780.00 and USD 1760.00 an ounce, whether you are long or short. V for volatility, not direction.

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
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is 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, Channel News Asia as well as in leading print publications including 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)