Oil prices rise, gold stuck in range

Oil sees fast-money long-covering

Oil prices fell overnight with traders using the excuse of omicron contagiousness, and China property defaults, to mark down growth expectations and take profits on tactical long positions built up this week. Brent crude fell by 2.50% to USD 74.00 a barrel, while WTI tumbled 2.80% to USD 70.60 a barrel.

In Asia though, prices have rallied modestly. Brent crude and WTI rose 0.50% to USD 74.35 and USD 71.00 a barrel respectively today. A slightly softer US dollar and Asian physical dip buyers appear to be combining to stabilise prices. However, my targets for the week, the 100-day moving averages at USD 77.00 and USD 74.00 respectively, look unlikely to be tested this week.

I also note the backwardation in the prompt futures calendar spreads, especially Brent, have narrowed to multi-month lows. That suggests that markets are heading to a more balanced arrangement in the near term. Nevertheless, last week’s lows were likely the lows for the month and possibly for 2022, especially with OEPC+’s poison pill still in play. This month’s meeting is officially still open to allow rapid responses to production targets.

Both contracts have recovered above their respective 200-day moving averages (DMAs) at USD 73.00 and USD 70.30 respectively, which should provide support on pullbacks. The 100-DMAs at USD 77.00 and USD 74.00 form initial resistance.

Gold remains marooned

Gold had another uninspiring night as it remains marooned in a USD 1770.00 to USD 1800.00 an ounce range. Gold fell by 0.40% to USD 1775.00 an ounce as the US dollar strengthened, edging higher to 1778.00 in Asia. Gold’s price action continues to disappoint, unable to rally on either a weaker or stronger US dollar, heightened or lessened risk sentiment, or higher or lower US yields.

The 50,100 and 200-day moving averages (DMAs), clustered between USD 1790.30 and USD 1795.50 are capping gains. USD 1800.00 and USD 1810.00 will prove equally formidable. Support lies at USD 1770.00 and USD 1760.00. The path of least resistance is lower.

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