Oil hits a crude inventory wall overnight as gold basks in the afterglow of White House induced safe-haven buying.
OIL
The vulnerability of OPEC’s ‘forward guidance’ rhetoric was starkly revealed late in the New York session, with both Brent and WTI falling some two percent following as the U.S. API Crude Inventories showed an unexpected increase of 882,000 barrels. It highlights the hope versus reality disconnect in the markets at the moment, with oil vulnerable to short-term headlines despite the feel-good assurances on the extension of OPEC/Non-OPEC production cuts.
The street will now look to tonight’s U.S. Department of Energy’s official crude inventory numbers for guidance. A drawdown of some 2.5 million barrels is expected and an unexpectedly smaller deficit (or a surplus) tonight may see more freshly minted long oil positions come under pressure.
Brent spot trades at 50.90 this morning having closed back below its pivotal 200-day moving average at 51.30 and first resistance. Above here, resistance sits at 52.15 and 52.40. Support is nearby at 50.50 and then 50.00.
WTI spot trades at 48.00 having failed twice at its 200-day moving average at 49.00 which is now pivotal daily resistance with 50.00 behind. Support lies initially at 47.20 with a break opening a possible move to the 46.00 area from a technical perspective.
Overall it would appear that both crude contracts have reached the topside limits of OPEC chatter as oil fails to find support even from a weaker U.S. Dollar in general and that the street will need something more concrete to maintain any sustainable upward momentum.
PRECIOUS METALS
Gold rose ten dollars to a high of 1245 overnight as a weaker U.S. Dollar across the board, and continuing political ructions in Washington D.C. led to safe-haven buying. The noise from the capital aside, U.S. data continues its recent trend of softer than expected which has resulted in lower rates across the curve giving more impetus to the yellow metal.
From a technical perspective, gold is trading very constructively, with the rally from the 1214 lows in early May followed by a solid week of higher lows each day. Gold now rests just below its pivotal 200-day moving average at 1247 with a daily close above implying more potential upside to the next resistance at 1260.
Below, the 100-day moving average has held each dip in gold over the last week and today lies at 1228.65. Interim support sits above at 1236.00.
Silver rallied 25 cents to resistance at 16.8830 in the New York session marking its 5th higher lower and higher close in a row. Like gold, silver is benefiting from daily headlines from the White House and softer U.S. data undermining the big dollar strength.
Silver has started constructively in the Asia session, trading as high as 16.9450 initially before profit taking occurred. Initial resistance is not far away in the 17.0000/17.0060 region with a daily close above opening the possibility of a technical move to the 100-day moving average at 17.4000.
Support appears at 16.6150 the overnight low and then 16.4000.
