Asia consolidates in quiet trading as the region prepares for the start of Japan’s Golden Week holidays starting tomorrow.
CRUDE OIL
Crude fell by over one percent overnight in holiday-thinned markets. The Baker Hughes Rig Count increased Friday evening again, and Libya announced overnight that oil production has increased to over 750,000 barrels a day. Libya is exempt from OPEC’s production cuts.
That leaves OPEC/NOPEC caught in a pincer movement from both Libya and U.S. Shale, with the increase in production from both potentially offsetting almost all of the production cuts. With OPEC/NOPEC’s production cut deal due for renewal (or not) at the end of May, the need to roll it over is increasing by the day as officials from both sides nervously look over their shoulders and into their national accounts. The market isn’t waiting though and has started voting with their feet, with Friday’s rally looking very much like a dead cat bounce.
Brent
Brent spot is flirting with its 200-day moving average at 50.90 with further support at 50.50 and 49.50. Resistance lies at 52.00 and 52.50.
WTI
WTI spot closed below its 200-day moving average at 48.75 in a bearish technical development. It has further resistance at 49.00 and then 49.80. Support appears at 47.90 with 46.50 the last line in the sand.
PRECIOUS METALS
Gold
After multiple failures over the past week at the 1271 region, gold finally cracked overnight, breaking through 1260, the lower end of its range to open at 1257 in Asia this morning. The 1% fall implies that the safe haven bid that has underpinned gold in recent times is rapidly eroding as the world becomes a quieter place. The news that the U.S. Government has avoided a budget driven shutdown this week has also weighed on the yellow metal.
Gold is just shy of important daily support today in the shape of its 200-day moving average at 1253. A daily close below here would be a bearish technical development. Behind this the next key level is the 1240 area with a break here indicating a much larger correction could be on the cards.
Resistance sits intraday at 1260 before the previously mentioned 1271 area and then 1280.
Silver
Silver has rallied 15 cents in thin liquidity but remains perched just above support at 16.8000, a break of which could signal a move to 16.6000 below which implies a possible sub 16.0000 correction.
Resistance remains at yesterdays highs of 17.2700 followed by the 100- day moving average at 13.3850. Overall silver continues to lead gold lower with its technical picture implying little relief for bullish traders yet.
