Oil eases, gold drifting

Oil eases on potential Ukraine summit

A potential reduction of Ukraine tensions following the US/Russia summit announcement this morning has seen some sellers emerge in oil in Asia. Oil has had quite the rally in my absence, driven by the predicted Ukraine tensions, and a world economy that appears to be moving quickly towards living with omicron. Middle East OPEC members continue to reiterate that the grouping’s 400,000 bpd monthly increments will be adequate to ensure supply to world markets, further supporting prices at these levels.

Both Brent crude and WTI are sitting roughly mid-range for the month, with Brent falling 0.60% to USD 93.10 in Asia, and WTI dropping 1.05% to USD 90.95 a barrel. The Russia/Ukraine situation will almost wholly determine short-term price action and short of a massive Russian pullback, it is hard to see much downside in oil prices from here. A Russian invasion, on the other hand, opens a massive spike in prices that could possibly extend above USD 140 a barrel.

OPEC+ compliance remains above 100%, hinting that they are pumping as much as they can. Iran/US talks are going nowhere, and I see no news about a massive increase in US shale oil. Dip buying, even at these levels should remain the default trade for now.

Key levels for Brent crude at USD 90.00 and USD 96.00 a barrel, and for WTI, USD 88.00 and USD 96.00 a barrel. Hang on for the ride in between.

Gold sideways in Asia

Gold has been the quiet achiever during my long absence, and its consistent rally despite typically adverse moves in the currency, stock, bond, and yes, crypto markets, is screaming that bull market nerves are becoming increasingly frazzled. Any escalation in Ukraine tensions will only fan gold’s bullish fires.

Looking at the charts, gold appears to have traced out a long-term base at USD 1750.00 an ounce and a rally through USD 1920.00 signals a further attempt on USD 2000.00 an ounce. Gold has drifted slightly lower on the summit headlines today, easing 0.40% to USD 1890.00 an ounce. Near-term support is at USD 1880.00, with resistance at USD 1810.00 an ounce.

Gold’s haven status looks well and truly back right now, and only a full-scale pullback by Russia’s military from Ukraine’s borders would change gold’s bullish outlook.

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