Oil prices slump in Asia

Oil down over Ukraine hopes, FOMC

Oil prices slumped again overnight in New York and have done so again in Asia today. Growth concerns from the Ukraine-Russia stagflation wave, and FOMC hike this week, and hopes that progress will be made in Ukraine-Russia negotiations has seen Brent prices fall nearly USD 40 over the past few sessions. It seems like the old adage that the best cure for high prices, is high prices is as strong as ever. The procession of analysts all calling for USD 200.00 oil last week was also a leading reverse indicator of a medium-term top.


Overnight, Brent crude slumped by 5.70% to USD 106.00 a barrel, tumbling another 3.75% to USD 102.00 in Asian trading. WTI tumbled by 6.30% to USD 102.30 a barrel overnight, falling another 3.90% to USD 98.25 in Asia this morning. Brent crude actually tested USD 100.00 a barrel this morning before bouncing sharply. A fall through USD 100.00 will likely see another wave of stop-loss and algo selling sweep the market, potentially extending losses to USD 96.00. WTI has fallen through USD 100.00 a barrel today and also has support at USD 96.00 and then USD 92.00 a barrel.


Like trying to pick the bottom in China tech stocks these past few months, picking the top in oil is a fraught business. And banking on Russia and Ukraine reaching a peace agreement is optimism of the highest order. The technical picture for oil is now neutral, meaning it could go down OR up from these levels. Any negative developments from Eastern Europe, or a refusal by OPEC+ to pump more, or complete failure of the Iran nuclear deal, could inspire a gigantic, short squeeze. The world’s supply problems won’t go away with a Ukraine settlement; I do believe, however, that markets have seen the top in oil prices last week.


Platinum leads gold lower

The shifting sands of Ukraine risk sentiment saw platinum plunge by nearly 16.0% overnight, and those same forces undermined gold’s haven appeal once again, sending it 1.90% lower to USD 1950.00 an ounce in New York. In Asia today, gold continues to retreat as sentiment finds its feet, gold falling 1.0% to USD 1931.50 an ounce.


Gold has taken out support at USD 1960.00 an ounce, which now becomes resistance, and could target support at USD 1920.00 later in the day. That opens a deeper correction targeting USD 1880.00. Adding to gold’s woes, the market seems to be belatedly waking up to the implications of a hawkish FOMC meeting this week, and the rise in US yields will not help gold’s cause. Regaining USD 2000.00 in the near-term likely means the Eastern European situation deteriorating markedly.


Silver has broken support at USD 25.0000 an ounce. Although it remains well clear of its multi-month breakout at USD 24.0000 an ounce, I will move to the side-lines on this trade, awaiting the FOMC and the Ukraine-Russia negotiating teams.


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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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