Consumption fears weigh on oil
Oil prices eased overnight, as the OPEC+ JMMC meeting signalled no change to OPEC+ production cuts in the future, and surging Covid-19 cases in the United States and Europe cloud the consumption picture. That sentiment will at worst, cap oil prices going forward, and at worst, feed into a negative feedback loop, especially if the US dollar rallies into US election day. Evidence also suggests that China’s pre-holiday buying spree has run its course for now, with private quotas full. I continue to believe, though, that OPEC+’s hand will not be forced until Brent crude falls through USD35.00 a barrel and stays there.
Brent crude fell 0.80% to USD42.45 a barrel overnight, edging another 0.25% lower in Asia to USD42.30 a barrel. Brent crude now has well-defined resistance at USD43.50 a barrel, with support in the USD41.30 to USD41.60 a barrel zone, containing the month’s low and the 200-day moving average (DMA).
WTI fell was unchanged overnight at USD40.70, edging slightly higher to USD40.80 a barrel in Asia. WTI has resistance at USD41.50 a barrel, with nearby support at USD40.25 a barrel, its 100-DMA. Critical support remains around USD39.00 a barrel.
Gold treads water around USD1900.00 an ounce
Gold continues to range trade each side of USD1900.00 an ounce in subdued range trading. Gold rose five dollars to USD1904.50 an ounce overnight as equities fell, but has since eased to USD1900.50 an ounce as US equity futures rose in Asia. It is clear that gold is moving to nuances in other markets and not on gold fundamentals alone. However, the ever-compressing ranges continue to form a triangle formation that suggests a massive breakout is coming, with a potential to move over USD100 an ounce.
The top of the triangle lies at USD1920.00 an ounce this morning. The triangle’s base is at USD1890.00 an ounce, with the 100-DMA behind that at USD1875.00 an ounce. A daily close above or below those levels signalling a breakout is finally commencing. In all likelihood though, the driver will come from elsewhere, and hence, waiting to see which way the tree falls is probably the wisest strategy for now.
