Crude prices fall ahead of OPEC+

Oil awaits OPEC+

Oil markets moved sharply lower overnight despite the ravages of Hurricane Ida and a huge 4.0 million-barrel fall in US API Crude Inventories, proving once again that markets use this data very selectively if it doesn’t agree with the popular narrative. Brent crude plunged by 2.25% to USD 71.70, and WTI fell by 0.85% to USD 68.50 a barrel. The best line I read to explain the fall overnight was that US demand would fall because of the damage from the hurricane. This is, of course, complete nonsense when you think about it. A better explanation is likely to be the softer US PMI and Consumer Confidence data and traders reducing long positioning into today’s OPEC+ meeting, with a dash of month-end flows thrown in for good measure.

This evening’s OPEC+ meeting will set the tone for the market, although the scheduled 400,000 bpd increase is well priced into markets. Only a significant deviation from that would spark volatility. Oil markets are rising on the first day of the month along with Asian equities, though. Brent crude has increased by 0.55% to USD 72.05, and WTI by 0.60% to USD 68.95 a barrel. It seems that Asia is pricing in a higher change of China stimulus lifting demand after this morning’s disappointing Caixin PMI, we shall see.

Despite the volatility overnight, I am holding to my view that Brent crude will remain in a roughly USD 72.00 to 74.00 a barrel trading ranges this week, OPEC+ or not. Similarly, USD 68.00 to 70.00 a barrel should contain WTI.

Gold’s consolidation continues

Gold contented itself to trade in a roughly USD 1800.00 to 1820.00 an ounce range overnight, finishing 0.14% higher at USD 1813.80 an ounce. Asia has been equally moribund, with gold rising just 0.14 dollars to USD 1816.40 an ounce.

Gold’s V-shaped recovery has run out of momentum for now, but that said, it is not showing any meaningful signs of fatigue here either. Gold has nearby support in the shape of the 100 and 200-day moving averages (DMAs) at USD 1809.50 and 1814.00 an ounce. As long as gold holds above this zone on a closing basis, it will continue consolidating gains with the moving averages offering an almost magnetic attraction at the moment.

Only a fall through USD 1780.00 an ounce will call the rally’s longevity into question while it faces formidable resistance between USD 1830.00 to 1835.00 an ounce. Like currency markets, gold looks to be waiting for Friday’s US employment data to determine its next directional move.

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