Oil markets sag under “delta hedging”

Asset classes are going their own ways now regarding their assessment of the risks of the delta-variant. Oil markets continued falling overnight as energy markets fret about future consumption patterns caused by delta-variant restrictions, actual or threatened, just as OPEC+ starts ramping up monthly production. The cases cropping up in China are a genuine concern. If they spike markedly, resulting in inevitable firm action from the government, we can expect oil prices to reflect that reality. 


Brent crude closed below its 100-day moving average (DMA) overnight at $69.80 a barrel, finishing 1.50% lower at $69.20. WTI closed below its 100-DMA at $67.30 a barrel, falling 1.70% to $68.00 a barrel. Today’s return of Japan and Singapore markets has seen some bargain hunting occurring from physical buyers, which has lifted Brent crude and WTI by 0.65%, respectively, to $69.65 and $67.25 a barrel. Today’s rally is much weaker in scope compared to the falls overnight, and oil’s technical picture remains fragile.


Overnight, both contracts fell quite a bit further intra-day than the daily closes suggest. Notably, Brent crude and WTI traced out double bottoms on the daily charts at $67.50 and $65.00 a barrel, respectively. These levels form the first critical support line for both contracts, with failure $65.00 for Brent crude and $62.50 a barrel for WTI.


Resistance lies at the respective 100-DMAs, which today are at $69.90 for Brent crude and $67.30 a barrel for WTI. Whilst delta concerns remain elevated; further gains will likely be limited to $72.00 and $71.00 a barrel. 


With sentiment fragile, tonight’s US API Crude Inventories could negatively affect prices if inventories rise sharply. The API data is often ignored by markets in favour of the official numbers that come out tomorrow night NYT. But when the data is running with the market sentiment wind behind it, it can often blow the boat onto the rocks.

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Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was OANDA’s Senior Market Analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes.

He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays.

A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others.

He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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