Oil and gold drift lower

Oil prices edged lower overnight, Brent crude easing 0.40% to USD64.25 a barrel, and WTI edging 0.25% lower to USD61.25 a barrel. Asia’s downward pressure continues with Brent crude falling to USD64.00 and WTI moving lower to USD60.95 a barrel.

Oil remains in range-trading mode after its capitulation lower last week, and several factors appear to be thwarting any attempted recovery. The backwardation in the futures curve has narrowed dramatically since last Friday’s sell-off, suggesting that supply and demand in the near term is rapidly rebalancing. That may be flattered by the fact that most speculative longs (now stopped out) would have been positioning in the front-month contracts.

Concerns of lower-than-expected European consumption due to Covid-19 can now include India, the world’s third-largest oil importer. Reuters reports that India’s crude imports for February fell 18.30% from a year ago, suggesting an economic slowdown that Covid-19 will exacerbate if cases continue spiralling. China demand also appears to be less than anticipated, perhaps due to maintenance schedules with the worst of winter behind them.

OPEC+ is unlikely to ease production cuts in early April if prices remain at these levels, which should provide some solace to oil bulls. But given the asthmatic nature of the bounce in prices from last Friday’s sell-off, I cannot rule out another last move lower in oil prices ahead of the meeting.

Brent crude has resistance at USD65.00 a barrel, with support at USD63.50 a barrel and then USD61.50 a barrel. Failure will see Brent crude retests the USD60.00 a barrel support zone. WTI has resistance at USD62.00 a barrel, with support at USD60.50 and USD59.00 a barrel.

Gold’s consolidation continues

Improved risk sentiment overnight saw gold drift slightly lower, falling 0.35% to USD1739.00 an ounce. In moribund trading, gold has edged 0.20% lower to USD1735.00 an ounce. While waiting for further direction input, gold seems content to consolidate within a wider USD1725.00 to USD1750.00 an ounce range.

Gold’s overall price action remains construction, though, and the yellow metal is attempting to form a longer-term base, between its 61.80% and 50.0% Fibonacci retracements, setting the scene for a move back above USD1800.00 an ounce if all goes to plan.

Gold has support at USD1720.00 and USD1700.00 an ounce, followed by the 61.80% retracement in the USD1685.00 area. It has initial resistance at USD1755.00 an ounce, followed by the 50.0% retracement at USD1760.00 an ounce.

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