Oil pares gains, gold range trades

Oil prices slump in Asia

Oil prices probed the topside intraday overnight but gave back those gains with Brent crude almost unchanged at USD 114.60 a barrel, and WTI edging 0.55% lower to USD 109.65 a barrel. In Asia, both contracts have slumped, with WTI notably, falling through longer-term support. Brent crude has fallen 3.40% to USD 110.75, and WTI has fallen by 3.80% to USD 105.50 a barrel.

There is a distinct lack of drivers behind this move, and certainly no headlines to justify it. I surmise that President Biden’s expected announcement of a temporary suspension of Federal fuel taxes this evening has prompted the selling, and I do note the US-centric WTI contract is leading the charge lower. From here, a more likely outcome is a widening of the Brent premium over WTI. Brent is the internationally traded benchmark and in the real world, supplies remain as tight as ever. ​

Today’s falls have bought my six-month support lines back into focus. ​ WTI has fallen through its six-month support line at USD 106.30 a barrel and is attacking the 100-day moving average (DMA) at USD 105.40. A daily close below USD 105.40 would be a very bearish technical development for WTI. Brent crude’s 100-DMA is at USD 108.40 today, with the six-month support line at USD 107.30 a barrel. Failure of the latter would also be a powerful bearish technical signal, although Brent crude remains well clear of both levels.

Given the weight of speculative long-positioning in WTI especially, it looks the more vulnerable to the Biden gasoline put. However, I remain of the opinion that the contortions of the futures market are not representative of the real-world situation. As such we shouldn’t get our hopes up for sub-USD 100 dollar oil just yet.

Gold range continues

Although gold’s interminable range-trading continued overnight, the falls of the past three sessions hint that any upward momentum for the yellow metal is doing an Elvis and is leaving the building. Gold has been grinding lower, even as US yields and the US dollar trade sideways.

Overnight, gold edged 0.30% lower to USD 1833.00 an ounce, falling another 0.33% in Asia to USD 1827.00 an ounce as US dollar strength returns. A bout of US dollar strength post-Powell testimony could finally set up a meaningful test of the bottom of the recent range around USD 1800.00 an ounce.

Gold has resistance at USD 1860.00 and USD 1880.00, the latter appearing an insurmountable obstacle for now. Support is at USD 1805.00 and then USD 1780.00 an ounce. Failure of the latter sets in motion a much deeper correction, potentially reaching USD 1700.00 an ounce. On the topside, I would need to see a couple of daily closes above USD 1900.00 to get excited about a reinvigorated rally.

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