Oil prices soar overnight
Oil markets are a mess of volatility at the moment, along with my oil data feeds, as Brent crude and WTI endured another day of very choppy trading in a very wide intraday range. Brent crude gave back all its intraday gains, even after API Crude Inventories fell, to finish 1.85% lower at USD 114.50 a barrel. WTI followed the same pattern, rising aggressively before reversing to finish 1.95% lower at USD 108.70 a barrel.
Asia, as it has done for the week at least, has walked in and immediately started buying the dip. Both contracts have unwound those losses completely. Brent crude rising 2.30% to USD 117.30, and WTI rising 1.75% to USD 110.55 a barrel. It may be that Russia reducing the flow of crude through the Caspian Pipeline Consortium (CPC) pipeline is finally filtering through to markets this morning. The Financial Times reports that the CPC is equivalent to 2.50% of global seaborne volume, and you don’t have to be a genius to know what Russia reducing its flows, or closing it, will do to an already tight market.
I will not try to guess the next USD 5.00 price movement; that is a fool’s errand. Suffice to say, I still believe that Brent crude and WTI will continue to trade in a roughly USD 100.00 to USD 120 range. Even the most tenuously positive Ukraine news should see both contracts quickly back below USD 110.00 a barrel. But if Russia is using “storm damage” to reduce the CPC flows, the USD 120.00 level could be in danger.
Gold eases as US yields rise
Gold produced a disappointing night of price action as higher yields pushed it 0.76% lower to USD 1921.00 an ounce, despite the greenback also falling. In Asia, gold is completely side-lined from traders’ minds, remaining unchanged in Asian trade. Gold tested and failed, once again, to hold above the USD 1940.00 an ounce level overnight. It has now traced out four consecutively lower daily highs above that region, an ominous development price-wise.
The risks are increasingly skewed to the downside, especially if the US dollar decides to rally in sympathy with higher US yields. Gold has well-denoted resistance between USD 1940.00 and USD 1950.00 now, followed by USD 1960.00 an ounce. Support lies at USD 1900.00, and failure will spark a retest of major support at USD 1880.00 an ounce. Failure of USD 1880.00 will likely spark a rapid capitulation trade targeting the low USD 1800s.
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