Inventories limit oil gains, gold yawns

API Crude Inventories halt oil recovery

After Monday’s price meltdown, oil prices consolidated nervously at their recent lows overnight. Brent crude finished the session 0.20% lower at USD 68.60 a barrel, while WTI edged 0.25% lower to USD 66.40 a barrel. Although risk appetite showed signs of recovery in other asset classes, notably equities, gains by oil were limited after the US API Crude Inventories rose unexpectedly by 0.8 million barrels, versus an expected drawdown of 4.17 million barrels.


The rise in API inventories was the first in some time. If official US Crude Inventories were to rise tonight, instead of fall by a forecast 4.5 million barrels, oil prices could be vulnerable to further losses. Indeed, oil remains very susceptible to intraday swings in risk sentiment and will remain so for the rest of the week.


Physical buyers in Asia have bought the dip today, pushing Brent crude 0.50% higher to USD 68.95 a barrel and WTI higher by 0.60% to USD 66.80 a barrel. Both contracts are flirting with their 100-day moving averages (DMAs) at these price levels, though, and today’s rally in Asia is not signalling a change of sentiment; more likely, a case of bargain hunting in thin liquidity.


Brent crude has resistance at USD 70.00 a barrel with the loss of support at USD 67.50 a barrel, signalling more losses targeting USD 64.50 a barrel. WTI has resistance at USD 67.50 a barrel with a failure of USD 65.00, signalling deeper losses to USD 62.00 a barrel.


Gold watches from the sidelines

Gold prices consolidated overnight, the yellow metal edging 0.15% lower to USD 1810.50 an ounce. Any gold rally is capped by a firm US dollar, while the downside remains supported in this week’s heightened global risk environment.


The loss of upside momentum has shifted the risks for gold to the downside. For now, though, and despite the noisy price action, gold remains hemmed in by its 100 and 200 DMAs at USD 1792.00 and USD 1826.00 an ounce, respectively.


Some short-covering has seen gold rise slightly to USD 1813.00 an ounce in Asia, with investors’ minds regionally clearly focused more on equity markets. A daily close below USD 1790.00 an ounce would signal a deeper correction targeting USD 1750.00. However, this is a week for patience, and with momentum shifting on sentiment, investors should respect the 100-and 200-DMAs and avoid getting caught out by whipsaw price action.

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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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