Libya nerves lift oil prices
Libyan officials announced several force majeure on oil deliveries overnight, as expected. With export terminals effectively shut down due to protests or occupation, oil prices edged higher, helped by the Ukrainian comments that Russia’s eastern assault had begun. As yet, there is little concrete evidence to confirm the latter, but it is a matter of when, not if. It was enough to send an always nervous oil market slightly higher. Brent crude rose 1.40% to USD 122.40 a barrel, where it remains in subdued Asian trading. WTI leapt 3.25% higher to USD 104.30 a barrel, coat-tailing surging US natural gas prices as a spring cold snap swept northern US states. It has edged 0.50% lower to USD 103.70 in Asia.
Markets in Asia seem content to adopt a wait-and-see approach today, reluctant to chase rallying prices any higher. China’s growth concerns are capping gains, but it seems that Asia is waiting for confirmation of the Russian offensive and potentially, another wave of geopolitical buying to hit the market.
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 spiked 20 dollars to USD 1998.50 an ounce overnight after President Zelensky of Ukraine said that Russia’s eastern offensive had begun. With little evidence to back that up, and with hawkish Bullard comments sending US yields and the US dollar higher, gold retreated to finish almost unchanged. It closed 0.27% higher at USD 1978.70 an ounce, retreating slightly to USD 1972.50 in the face of Asian US dollar strength today.
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 still has initial resistance at USD 2000.00 an ounce, although I believe option-related selling there will be a strong initial barrier. Certainly, the price action suggested just that overnight as the gold rally hit a brick wall ahead of USD 2000.00 an ounce. However, if v2000.00 is cleared, gold could quickly gap higher to USD 2020.00 an ounce quickly, and potentially, test 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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