Oil rises on Nord Stream, gold drifting

Russia lifts oil prices

Russia has further reduced gas flows to Germany overnight, which is threatening to unwind oil’s move lower on Nord Stream 1 reopening. As that reality set in, Brent crude rose 1.20% to USD 104.85, and WTI gained 1.30% to USD 96.25 a barrel. In Asia, the Russian moves have also spooked local markets, sending prices sharply higher. Brent crude is 1.85% higher at USD 106.60, and WTI has leapt 1.80% higher to USD 98.00 a barrel.

Despite the price discount by WTI over Brent widening to near three-year highs, both contracts have futures curves that remain in deep backwardation, signalling that prompt physical supplies remain tight, even if US gasoline stocks are now rising sharply and refining margins are falling. Russia remains the wild card in the energy space, supporting prices, a situation unlikely to change anytime soon. Of the two contracts, WTI looks the more vulnerable, having the greater physical beta to US domestic energy consumption.

Brent crude is approaching significant technical resistance at USD 108.80, a sustained break of which signals a larger rally targeting USD 115.00 a barrel. Support is at USD 101.50 a barrel. WTI has resistance at USD 100.00, while it once again, bounced off its 200-day moving average (DMA) at USD 94.85 overnight. Until a sustained break of the 200-DMA occurs, significant topside squeezes by WTI remain entirely possible.

Gold trades sideways

Gold finished 0.45% lower at USD 1720.00 overnight, edging 0.20% higher to USD 1723.25 an ounce in another aimless Asian session. The charts continue to suggest that while gold is trying to form a medium-term low, its price action remains underwhelming, and we will have to wait until we get into the meat of the week’s calendar to see if this scenario plays out.

Gold needs to overcome heavy resistance at the USD 1745.00 an ounce triple top before the gold bugs can really start to get excited. ​ It has support at USD 1680.00, and then the longer-term support around USD 1675.00 an ounce zone. A sustained failure of USD 1675.00 will signal a much deeper move lower targeting the USD 1450.00 to USD 1500.00 an ounce regions.

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