Oil prices fall on IEA release
Oil prices dipped overnight after the IEA announced a globally coordinated reserve release of 120 million barrels, which is actually a net 60 million release when the US contribution is stripped out. Brent crude and WTI fell by over 4.0% overnight, assisted by higher than expected US Crude Inventories, to USD 101.70 and USD 96.40 respectively.
With the IEA release and the US SPR releases now priced in, Asia has walked in and bought the dips in both contracts this morning. That is consistent with the usual behaviour of buyers from the energy-hungry region, with plenty of Asian interest to buy on any and all pullbacks. Brent crude and WTI have risen by around 1.0% to USD 102.40 and USD 97.10 respectively.
Short of a serious escalation of virus restrictions in mainland China, it looks like most of the bearish news for oil prices is now out there. I expect Brent to remain in a choppy USD 100.00 to USD 120.00 range, with WTI confined to a USD 95.00 to USD 115.00 a barrel range.
Gold’s consolidation continues
Gold continued its sideways trading overnight, with the US dollar and US yields barely moving. That meant another sideways day for gold once again, closing just 0.14% higher at USD 1926.00 an ounce. Further US dollar strength today has pushed gold lower in Asia, falling 0.20% to USD 1922.00 an ounce.
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. Failure of USD 1915.00 an ounce will signal a retest of important support at USD 1880.00. Failure of USD 1880.00 should see a capitulation of long positions, extending losses to the USD 1800.00 region. At those levels, patient traders might think about dipping their toes in again.
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