Oil markets remain volatile
Oil prices finished modestly higher overnight, after another chop-fest session which saw Brent crude and WTI fall nearly four dollars intraday. Powell’s soothing comments around 0.50% rate hikes stabilised sentiment in New York, but it is likely that the Russian natural gas sanctions on some European importers were the reason that oil rebounded. With European natural gas prices soaring, it is inevitable that some spillover into oil will occur. If anything, it should support the downside in prices for now, even if recession fears in China and Europe et al slow gains to the upside. An escalation by Russia on the sanctions front is likely to flow into oil price strength.
Brent crude rose 0.30% overnight to USD 107.80 a barrel, having fallen as low as USD 104.75 intraday. WTI finished 1.05% higher at USD 106.70 a barrel, having traded as low as USD 102.70 intraday. Asia has immediately pushed prices higher this morning, likely hedging against weekend news risk around Eastern Europe. Brent crude has added 0.90% to USD 108.80 a barrel, and WTI has gained 0.60% to USD 107.30 a barrel.
Brent crude has formed trendline support at USD 101.70 a barrel that goes back to January 2022, while WTI has formed the same pattern at USD 98.85 a barrel. Resistance remains at USD 114.75 and USD 111.50 a barrel respectively. Eastern European tensions will now skew risks to the topside once again. I am sticking to my broader calls for the past two months that Brent crude remains between USD 100.00 to USD 120.00, and WTI between USD 95.00 and USD 115.00 a barrel.
Gold wilts on US dollar strength
Precious metals as a group suffered heavy losses overnight, with investors appearing to prefer the haven of the US dollar and US bonds, with their appealing yields. The impressive US dollar strength saw gold take out its 200-day moving average and triangle support between USD 1835.00 and USD 1836.00, finishing 1.65% lower at USD 1822.00 an ounce. In Asia, the modest correction by the US dollar had seen gold creep 0.20% higher to USD 1825.75 an ounce.
The failure of USD 1835.00 now sets up a test of support at USD 1820.00 and then potentially USD 1780.00 an ounce. Failure of the latter suggests a deeper correction to USD 1700.00. Gold has resistance at USD 1835.00, USD 1860.00, and USD 1884.00 an ounce, its 100-day moving average. Only a sudden US dollar sell-off is likely to change the bearish technical outlook.
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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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