Oil bounces back, gold trading sideways

Oil rallies sharply overnight

Oil had another hugely volatile session overnight, with Brent crude and WTI rallying by over 4.0%, reversing the losses of Wednesday. That came despite a huge increase by US official Crude Inventories by 8.235 million barrels. That was a slightly misleading headline though, with the increase aided by disruptions in US refineries. Notably, gasoline inventories slumped by 2.5 million barrels as well. With US refining capacity running at an unrealistic 94.50%, any disruption will impact refined products and backstop WTI, in particular.

Brent crude finished 4.50% higher at USD 104.25 a barrel, while WTI rallied by 4.15% to USD 102.20 a barrel. Oil’s rally actually started yesterday as the USD 100.00 Brent crude proved an irresistible temptation for Asian physical buyers. The slump in US gasoline inventories helped the process along by highlighting how tight supplies remain, especially in the refined categories. Asia has continued buying the dip today as well, perhaps cognisant of weekend headline risk. Brent crude has risen 0.75% to USD 105.00, with WTI adding 0.50% to USD 102.80 a barrel.

Brent crude has resistance at USD 106.00 and then its 2022 trendline breakout at USD 108.85, followed by the 100-day moving average (DMA) at 110.50. It has traced a double bottom at USD 98.60, followed by the 200- day moving average (DMA) at USD 96.35 a barrel. WTI has resistance right here at USD 102.00 and then its 100-DMA at USD 107.16 a barrel. Support is at USD 96.60, USD 95.00, and then its 200-DMA at USD 93.50 a barrel.

Gold is sideways in Singapore

Without much movement in the currency space overnight, gold remained almost unchanged at USD 1740.50 an ounce, trading in a narrow range. Asia is equally dull, gold edging lower to USD 1740.00 an ounce.

Since breaking USD 1780.00, gold’s technical picture has deteriorated rapidly, and it is clear it remains at the mercy of the US dollar’s direction. The only positive note to be seen is that its RSI has fallen into oversold territory, allowing for a modest corrective rally to occur. Despite a couple of sessions of sideways trading, gold remains anchored at the bottom of its range and only a miracle slump by the US dollar this evening is likely to move it off the seafloor.

Gold has resistance at USD 1780.00, USD 1785.00, and USD 1820.00, its downward trendline. Support is at USD 1720.00, followed by USD 1675.00. Failure of longer-term support at USD 1675.00 sets in motion a much deeper correction, potentially reaching USD 1500.00 an ounce.

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