Oil collapses on OPEC+ and Iran nerves
With the backwardation in the oil futures curves having vanished into thin air, it was odd that OPEC+ decided to open the taps from May. Although the reaction was modest on a holiday-thinned Friday, investors voted with their feet overnight, sending Brent crude 3.70% lower to USD62.25 a barrel, and WTI 4.05% lower to USD58.80 a barrel. Short-covering this morning in Asia has seen both contracts add 0.75% to USD62.70 and USD59.30 a barrel, respectively.
Although some bargain hunting has supported prices today, its longevity is suspect. With deteriorating Covid-19 situations in Europe and especially India, consumption is sure to take a hit. Additionally, India is taking a leaf out of China’s book and flexing its buying power muscles with Saudi Arabia, its biggest supplier. Saudi Arabia has raised prices to Asian customers overnight, but India seems intent on increasing buying from alternative sources. That may have the effect of eroding OPEC+ discipline going forward.
Nagging fears of increased Iranian supply also persist, with increased Iranian exports, by foul means or fair, in no small part of the reason oil’s rally has run out of steam. A breakthrough in the US-Iran indirect talks in Vienna this week will almost certainly lead to another decisive move lower by oil markets, as fears of more Iranian supply increase.
Brent crude’s resistance is distant at USD65.50 a barrel after the overnight fall, with support at USD62.00 and USD61.30 initially, followed by the March low at USD60.30 a barrel. WTI has well-denoted resistance at USD62.00 a barrel with support at USD58.65, followed by the March lows at USD57.30 a barrel.
Gold trades sideways
Gold traded sideways overnight, following two impressive daily rallies previously. Given the amount of bullish risk sentiment sweeping US markets overnight, the fact that gold didn’t fall can be taken as a win for long-suffering bullish investors. Undoubtedly a weaker US dollar and slightly lower US yields were supportive, but gold continues to show resilience after testing and rallying from long-term support last week.
Overnight, gold edged 0.10% lower to USD1728.00 an ounce, before rising 0.30% to USD1733.50 an ounce in Asian trading this morning. Although gold has traced a double bottom near USD1680.00 an ounce, further reinforcing the longer-term bottoming formation of prices on the charts, gold needs to rally through USD1755.00 an ounce to confirm a structural low is in place.
Gold has support at USD1720.00 and USD1705.00 an ounce, followed by the long-term support region between USD1675.00 and USD1685.00 an ounce. Resistance is at USD1745.00 and USD1755.00 an ounce.
