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WTI breaks below USD 90, gold shining brightly

Oil

The oil market is a mixed bag as demand destruction is met with limited spare capacity. ​ Ongoing weakness should be unlikely since the oil market remains tight, but the break of the key technical USD 90 level could unleash some momentum selling. ​ WTI crude should have seen massive support at the USD 90 a barrel level, but an intensifying global economic slowdown is changing that oil market is tight trade. WTI crude should see some support at the USD 88.75 if this breach of the USD 90 level holds.

Weakening economic data from the UK and Germany kept oil heavy early, but buyers clearly emerged. Oil price weakness should be limited from here as energy traders know that China’s demand for crude could bounce back anytime soon and that the SPR release will end in the fall. If the energy markets remain in doom and gloom demand mode, oil could fall another 5 dollars, but that should not be the base case. ​

Earlier, the Saudis raised September prices to record levels for Asia. The increase of Arab light crude was 50 cents, which was less than the USD 1.50 increase some energy analysts were expecting. ​ The Saudis are keeping the oil market tight and that should eventually provide some support for crude prices. ​ ​

The resumption of Iran nuclear deal talks will closely be watched to see if negotiators can break the impasse. Energy traders have watched this movie before, and no one will start pricing extra barrels of Iranian crude to hit the market before the end of the year.

Gold moves higher

Gold continues to rally as geopolitical tensions won’t be going away anytime soon and as central bankers worldwide brace for recessions. ​ The BOE had a rather gloomy outlook and the Czech central bank (CNB) surprised markets by halting their rate hiking cycle.

Gold’s rallying as Wall Street becomes fixated with a global economic slowdown that will get much worse by year-end.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya [4]

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya