Oil rises, gold trading sideways

Brent crude rises above USD 120.00

The disconnect between energy prices and optimism in equity markets continues today in Asia. On Friday, oil prices surged once again, driven by an unrelenting squeeze on refined products, notably diesel and gasoline, globally, with the US driving season about to begin in earnest. Brent crude rose by 1.63% to USD 119.20 a barrel on Friday, rallying another 0.70% to USD 120.05 this morning. WTI rose by 0.85% to USD 115.10 a barrel on Friday, rallying another 0.83% higher to USD 116.05 in Asia today.

Markets pricing in peak virus in Beijing and Shanghai are behind the rally in oil prices today, with a China reopening likely leading to increased oil consumption. Unlike recent times, markets seem unconcerned about oil moving back to March highs, emphasising how much pent-up risk-sentiment demand there appears to be out there.

We can expect no solace from OPEC+ on production increases on Thursday. The grouping cannot pump to meet its present quotas as it is, and a 430,000 bpd increase is all we can expect. Additionally, the EU Russian oil import ban is still a work in progress and if it gets over the line this week, expect supplies to tighten again. As such, the risks are now increasing of a move towards the post-Ukraine highs we saw in February.

Both Brent crude and WTI are at the top of my expected medium-term ranges at USD 120.00 and USD 115.00 respectively. A weekly close above these levels would be a major signal indicating more gains ahead. Brent crude’s next technical resistance is at USD 124.00 a barrel, and then USD 132.00, with support at USD 116.00. WTI has resistance nearby at USD 116.70 a barrel, with nothing afterwards until USD 127.00 a barrel. Support is at USD 115.00 and USD 113.00 a barrel.

Gold trades sideways

Gold seems determined to bore traders to death after another inconclusive overnight range-trading session. It finished Friday 0.13% lower at USD 1853.00 an ounce, before gaining 0.44% to USD 186.75 an ounce in Asia today. Gold’s price action continues to suggest caution, with the US dollar sell-off not translating to any meaningful gold strength. If global risk sentiment turns lower, gold could quickly follow.

Gold has nearby support at USD 1840.00, followed by USD 1836.00 an ounce. Failure sees the possibility of a mini-capitulation by longs that could reach as far as USD 1780.00 an ounce. Gold has resistance here at USD 1862.00, ​ then USD 1870.00, followed by USD 1886.00 an ounce, its 100-day moving average.

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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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