Oil is slightly softer in Asia
Oil prices fell in Asia yesterday after the Biden SPR release story started circulating. That was confirmed overnight, with 1 million bpds for the next 180 days to be released. Markets had mostly priced it and the OPEC+’s 432,000 bpd production increase, meaning both Brent and WTI eased only slightly in New York trading. Brent crude finished 4.60% lower at USD 107.40, and WTI fell by 5.85% to USD 101.15 a barrel.
In Asia, softer PMI data across the region has sparked growth worries and sees oil easing once again. Brent slipping to USD 106.00 a barrel, and WTI to USD 99.90 a barrel. The US SPR release should be enough to cap oil prices now unless the Eastern European situation deteriorates markedly. Conversely, if Venezuelan and/or Iranian oil is allowed to return to the official international market, in combination with OPEC+ hikes and the SPR release, I would confidently say we have seen the highs in oil. I fully admit there are a lot of different variables there.
Overall, I still expect Brent to trade in a choppy USD 100.00 to USD 120.00 range, with WTI bouncing around in a USD 95.00 to USD 115.00 a barrel range. The US SPR and monthly OPEC+ production hikes are balanced out by geopolitical tensions elsewhere.
Gold trades sideways
Gold traded sideways once again overnight, eking out a 0.23% gain to USD 1937.00 an ounce, having tested USD 1950.00 intraday. Gold remains trapped in a USD 1920.00 to USD 1950.00 range, but its inability to rally as the US dollar and US yields fell this week is a concern and I believe risks are still skewed to the downside. Gold is unchanged in Asia, with no sign of weekend haven buying, another ominous sign, especially as the US dollar continues to rally today.
Gold markets once again look like they have got themselves long and wrong, this time above USD 1960.00 an ounce. With gold unable to rally on a softer US dollar or lower US yields, the risks of another downside washout are rising once again. Gold has resistance at USD 1950.00, with support at USD 1920.00 and USD 1915.00. A sustained break of the USD 1880.00 region will probably trigger a capitulation trade, potentially pushing gold down to USD 1800.00 an ounce.
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Jeffrey Halley
He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays.
A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others.
He was born in New Zealand and holds an MBA from the Cass Business School.
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