Oil rises on sanctions talk, gold steady

April 5, 2022 Share Print 0

Oil prices higher on European sanctions fears

Oil prices started rallying in Asia yesterday after Europe indicated tighter sanctions on Russia. Fears mounting that Europe would finally target the Russian energy sector, further squeezing supplies. Brent crude finished 3.50% higher at USD 107.95 a barrel, and WTI rose 4.35% to USD 103.60.

Early Asian trading saw both contracts gain over 1.25% in holiday-thinned trading, as European sanction nerves continued. However, some calm has returned, and oil has pared its gains. That leaves Brent crude and WTI around 0.80% higher at USD 108.70 and USD 104.50 respectively.

Europe sanctioning Russian energy is not my base case and I still expect Brent to trade in a choppy USD 100.00 to USD 120.00 range in coming weeks, with WTI bouncing around in a USD 95.00 to USD 115.00 a barrel range. The US SPR and monthly OPEC+ production hikes balanced out by geopolitical tensions elsewhere.

Gold strengthens slightly

Gold appeared to catch some geopolitical haven bids yesterday, defying a stronger US dollar to rise by 0.39% to USD 1932.50 an ounce. Despite the gains overnight, gold remains stuck in a roughly USD 1915.00 to USD 1950.00 an ounce range, with no signs of a directional breakout yet either way.

The risks are still skewed to the downside for gold, especially if US yields and the US dollar keep climbing. Only a rally through USD 1970.00 changes that outlook temporarily. Gold has resistance at USD 1940.00 and USD 1950.00 an ounce. Meanwhile, a sustained break of the USD 1880.00 region will probably trigger a capitulation trade, potentially pushing gold down to USD 1800.00 an ounce.

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Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022

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