APAC Commodities: Every Rose Has It’s Thorn

A confusing night for commodities as gold trades sideways but oil falls despite a very bullish Crude Inventory Report.

Oil traders were left scratching their heads in confusion overnight as the U.S DOE Crude Inventory Report showed much larger than expected drawdowns in crude and gasoline inventories. It should have been bullish for oil, and indeed it was for a short time, but it turned out to be a dead cat bounce with both Brent and WTI finishing in New York approximately 1.20% lower than their open.

Every rose has its thorn apparently, and in oils case, it may well have been President Trump’s announcement from the White House Rose Garden, that the United States would leave the Paris Climate Accords. From our point of view, this could lead to a drilling free for all in the U.S. and also see other signatories waver in their commitments as well. This outcome could increase the supply side equation from the United States and complicate OPEC’s forward projections. A scenario that would not be favourable to oil prices.

Whichever way you cake the cake, however, Brent in particular and WTI both start Friday looking more like sludge than light sweet.

Brent spot opens at its New York lows at 50.10 with immediate support just below at 50.00. Behind this is plenty of clear air until the 48.00 regions. Resistance is at the 51.20 level followed by 51.50 its 200-day moving average.

WTI spot trades at 47.75 with initial support at 47.15 before minor support appears at 45.30. Resistance is at 49.00.

GOLD

Gold closed five dollars lower overnight, having shrugged off the worst of its overnight sell-off to post a mid-range close for the New York session. More importantly, it held the ascending trend line support at 1261.00 intraday to keep the recent uptrend intact for now. A slightly stronger U.S. Dollar overnight saw gold run out of steam in the absence of any geopolitical news to cause safe haven buying.

This morning gold trades at 1263.20, resting on the abovementioned trend line, now at this level. Beyond here support appears at 1259.00 with a break below this level possibly triggering some stop-loss selling. Resistance lies at 1270.50 and then at 1274.25, Wednesday’s highs.

Buying may emerge ahead of 1260.00, at least initially, in Asia, if we follow previous weeks recent patterns. Traders are preferring to hedge potential weekend event risk by picking up the yellow metal in Friday’s sessions.

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