Brent crude rises once again as Asian buyers buy the dip
To describe the price action on oil markets as wild yesterday would be a gross understatement. Brent crude rose nearly 10 US dollars to just shy of USD 106.00, before retreating to USD 99.00 at the close, a 2.0% gain for the day. Likewise, WTI touched USD 100 a barrel before retreating to USD 93.00, a 0.80% gain. With US and European sanctions notably excluding Russian energy exports and their payment paths, energy markets quickly priced in the limit of Western sanctions and its low tolerance for economic pain to support Ukraine. Additionally, President Biden said that a coordinated global release of oil from SPRs was on the way, adding another headwind.
In Asia, though, prices are rising sharply once again, as Asian buyers piled into the dip in prices ahead of the weekend. Brent crude has risen 2.80% to USD 101.80 a barrel, while WTI has rallied by 2.70% to USD 95.50 a barrel. I suspect the Asian price action highlights the nervousness of regional importers, with Asia a huge net energy importer. It also suggests that despite the sharp reversal overnight, geopolitical nerves are going to keep prices elevated. It is also clear that nobody wants to go into the weekend short oil. Short of an Iran nuclear deal being announced today, I cannot see any strong reason to sell oil at these levels still, and the risks are still skewed to the upside.
Gold retreats on peak-sanctions
Gold had a frenetic session overnight, trading in a nearly USD 100 range, rising from USD 1910.00 to USD 1975.00 an ounce, whilst touching support at USD 1880.00 intraday. It was clear that a lot of fast money, and not haven money, got involved in the intraday price action yesterday as gold staged a spectacular fall from its highs after the Western sanctions were perceived as limited in scope. Gold finished the day 0.30% lower at USD 1904.00 an ounce.
With the weekend upon us, Asian buyers are loading up on gold today as a weekend risk hedge. That has pushed gold 0.50% higher to USD1913.50 an ounce. Gold has immediate resistance at $1920.00, and then nothing until the overnight highs at $1975.00 an ounce. Support lies at $1875.00 and $1850.00 an ounce.
I expect dips to remain supported in gold now that the fast money has disappeared, and some normality has returned to trading. Gold’s next move will be determined by whether markets receive indirect confirmation that the West has reached peak-sanctions with Russia, or whether they intend to escalate them further. My money is on the former, meaning that gold may have seen its medium-term high yesterday.
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Jeffrey Halley
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.
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