Crude inventories saves oil’s blushes

Oil would probably have finished the overnight session lower as well but can thank a lower than expected rise in official US Crude Inventories. The 768,000-barrel print was well below market expectations of a 1.65-million-barrel increase. That was enough to lift Brent crude and WTI to a positive close. Brent crude rose 0.78% to USD44.15 a barrel. WTI finishing 0.56% higher at USD41.60 a barrel.

Both contracts have eased by 10 cents in Asian trading, in line with a slightly stronger US dollar today in Asia. Trading remains directionless for the most part, though, with both contracts content to consolidate their recent monthly gains near to the top of their current ranges.

OPEC’s meeting at the end of the month looms as the next major risk event for oil. More positive vaccine news will probably lift prices again, but after Moderna’s announcement, seem to be having diminishing returns. That said, as previously stated, the imminent arrival of Covid-19 vaccines has likely put a longer-term bottom under oil prices, as the world looks towards a better consumption picture in 2021. That is evident by the continued tightening of the contango in the 6-month calendar spread.

At this stage, unless Brent crude prices dramatically collapse to near USD35.00 a barrel again, I suspect OPEC+ will hold its nerve. That will likely cap medium-term gains for Brent at USD48.00 a barrel at best until more evidence appears that the global economy is achieving an escape trajectory. That will likely require mass vaccinations reopening international movement of a large scale.


Gold ranges but is testing support

Gold’s range continued to compress overnight, reflecting a lack of drivers to move it one way or the other substantially. Gold retreated 0.42% to USD1872.60 an ounce overnight and has fallen to USD1868.50 an ounce this morning as the US dollar has firmed in Asia.

One unintended effect of gold’s tight ranges over the past week is that longer-term trendline support has risen much closer to market. That line comes in today at USD1870.50 an ounce. Although Asia has moved below it, I would prefer to watch for a daily close beneath before sounding the alarms.

One impression I do have is that the short-term market remains long after the USD100 drop on November 9th. With momentum stalling, the risk has increased that gold could suffer another wash-out lower, particularly if it closes under USD1870.50 an ounce this evening. That sets up further losses to the USD1850.00 an ounce zone initially, and could potentially extend to the 200-day moving average (DMA) at USD1792.00 an ounce. Gold still faces strong resistance at USD1900.00 an ounce, followed by the 50 and 100-DMA’s close behind, at USD1901.50 and USD1908.90 an ounce respectively.