Libya nerves lift oil prices

Oil prices are around 1.0% higher today in Asia as trading resumes after the Good Friday holiday. In thin trading, oil closed modestly higher on Thursday, and today, Brent crude has risen to USD 112.75 a barrel, and WTI to USD 108.00 a barrel. There are a few reasons behind today’s rise. OPEC reported that production rose only 57,000 bpd in March according to data, not even climbing by the agreed 253,000 bpd. The IEA said 3 million bpd of Russian production would be impacted by sanctions by May, and the Russian Interfax agency said Russian production slipped by 7.50% in the first half of March.

Finally, over the weekend, protestors appear to have shut down one small Libyan oil field and completely disrupted loading at a major coastal terminal. Although only 75,000 bpd of actual production has been taken offline, with global supplies now so tight, even the most minor disruption is likely to have an outsized impact on prices.

With so much volatility in intraday oil prices, and extreme reactions to headline risks, technical levels have become rather irrelevant. Overall, therefore, I continue to expect that Brent will remain in a choppy USD 100.00 to USD 120.00 range, with WTI in a USD 95.00 to USD 115.00 range. Brent crude has further support at USD 96.00, and WTI at USD 93.00 a barrel.

Gold’s rally continues

Gold booked a modest retreat on Thursday as US yields and the US dollar climbed noticeably higher. Gold fell 0.22% to USD 1973.50 an ounce. In Asia today, gold has resumed its rally, despite the US dollar also strengthening. Gold has risen by 0.54% to USD 1984.00 an ounce.

Gold’s price action, it must be acknowledged, remains constructive. It is managing to maintain gains on US dollar strength, while also grinding higher even as US yields and the greenback both strengthen. Gold has initial resistance at USD 2000.00 an ounce, although I believe option-related selling there will be a strong initial barrier. If that is cleared, gold could gap higher to USD 2020.00 an ounce quite quickly and potentially, a retest of USD 2080.00 an ounce.

A retreat through USD 1960.00 and USD 1940.00 an ounce will signal a whipsaw move lower, chopping out the short-term money. Failure of USD 1915.00 will signal a retest of important support at USD 1880.00 and possibly USD 1800.00 an ounce.

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