Oil markets rebound on OPEC+ cohesiveness
Oil prices slumped yesterday in Asia as news came in that the Suez Canal was about to reopen. But Reuters reported overnight that both Saudi Arabia and Russia appear committed to maintaining production cut levels at the OPEC+ meeting on Thursday. That was enough to reverse the sell-off, with Brent crude finishing 1.25% higher at USD65.15 a barrel, and WTI rising 1.65% to USD61.80 a barrel.
Asian trading has been non-descript, with both contracts edging 0.25% lower this morning. With both Russia and Saudi Arabia seemingly on the same page, and global data releases this week expected to show the global recovery is on track, oil’s downside is likely limited ahead of the Thursday meeting. India and Europe fears appear baked into prices for now, and the recent sell-offs have undoubtedly much-reduced speculative long positioning.
OPEC+ being OPEC+, surprises cannot be ruled out. But with Iranian exports rising, and with the backwardation in the futures markets having disappeared, the incentives for OPEC+ to squabble of production targets are low. Oil prices may not take-off from here, but it is unlikely this week’s lows will be retested.
Brent crude has support at USD63.40 and USD60.00 a barrel, with resistance just above at USD65.40, followed by USD66.50 a barrel. WTI has support at USD59.25 and USD57.20 a barrel, with resistance at USD62.20 and USD63.20 a barrel.
Gold’s retreat bugs gold bugs
The rise in the US dollar overnight, powered by higher US long-yields, finally saw gold stage a mini-retreat, falling 1.20% to USD1712.00 an ounce, a USD20 fall for the session. Given the narrow ranges of late, a USD20 an ounce fall is significant, and more importantly, gold closed below previously firm support at USD1720.00 an ounce.
In the bigger picture, the premise that gold is attempting to trace out a longer-term bottom is still holding. Only a series of daily closes below the 61.80% Fibonacci at USD1785.00 an ounce invalidates that premise. Nevertheless, with the Biden announcement to come tomorrow evening, the threat to gold rises, particularly if the details cause bond yields to have a tantrum.
Gold has edged lower to USD1707.00 an ounce in Asia, as the bearish tone continues. It is now just above support at USD1700.00, followed by USD1685.00 and USD1677.00 an ounce. Resistance is now at USD1720.00 an ounce, followed by USD1745.00 and USD1755.00 an ounce.