WTI breaks below USD 90, gold shining brightly

Oil

The oil market is a mixed bag as demand destruction is met with limited spare capacity. ​ Ongoing weakness should be unlikely since the oil market remains tight, but the break of the key technical USD 90 level could unleash some momentum selling. ​ WTI crude should have seen massive support at the USD 90 a barrel level, but an intensifying global economic slowdown is changing that oil market is tight trade. WTI crude should see some support at the USD 88.75 if this breach of the USD 90 level holds.

Weakening economic data from the UK and Germany kept oil heavy early, but buyers clearly emerged. Oil price weakness should be limited from here as energy traders know that China’s demand for crude could bounce back anytime soon and that the SPR release will end in the fall. If the energy markets remain in doom and gloom demand mode, oil could fall another 5 dollars, but that should not be the base case. ​

Earlier, the Saudis raised September prices to record levels for Asia. The increase of Arab light crude was 50 cents, which was less than the USD 1.50 increase some energy analysts were expecting. ​ The Saudis are keeping the oil market tight and that should eventually provide some support for crude prices. ​ ​

The resumption of Iran nuclear deal talks will closely be watched to see if negotiators can break the impasse. Energy traders have watched this movie before, and no one will start pricing extra barrels of Iranian crude to hit the market before the end of the year.

Gold moves higher

Gold continues to rally as geopolitical tensions won’t be going away anytime soon and as central bankers worldwide brace for recessions. ​ The BOE had a rather gloomy outlook and the Czech central bank (CNB) surprised markets by halting their rate hiking cycle.

Gold’s rallying as Wall Street becomes fixated with a global economic slowdown that will get much worse by year-end.

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