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.

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