Oil and gold show slight gains

Oil prices edge higher on Ida

With the amount of actual damage to the US Gulf of Mexico production and refining infrastructure still unclear, oil prices edged higher overnight on supply concerns. Brent crude rose 1.10% to USD 73.35, with WTI climbing 0.70% to USD 69.10 a barrel.

Prices have eased in Asia after soft China PMI data and news that the critical US Colonial oil pipeline will partially reopen post-Ida. Brent crude has slipped 0.40% to USD 73.05, and WTI has retreated by 0.35% to USD 68.65 a barrel.

Attention will now turn to the OPEC+ meeting tomorrow, which will almost certainly keep its output policy unchanged and add another 400,000 barrels per day to production. Brent crude between USD 70.00 and USD 75.00 a barrel seems to be the grouping’s sweet spot, and with the futures curve in backwardation, demand remains robust despite the short-term noise. Last week’s V-shaped recovery in prices will also give OPEC+ confidence that markets can absorb the extra supply.

While we await more visibility from OPEC+ and IDA, I expect Brent crude to remain in a USD 72.00 to 74.00 a barrel range. Similarly, USD 68.00 to 70.00 a barrel should contain WTI.

Gold consolidates on technical support

With currency and bond markets having a quiet overnight session, gold saw some profit-taking on long positions. Gold edged 0.40% lower to USD 1810.50 an ounce in a nondescript session. Today, a weaker US dollar in Asia has seen the yellow metal add 0.25% as it climbs to USD 1815.00 an ounce.

Gold’s rally seems to have 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 1809.70 and USD 1813.20 an ounce. As long as gold holds above this zone on a closing basis, it will continue consolidating gains.

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 USD 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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