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Oil finds eager dip-buyers in Asia

The gradual reopening of the Texas energy sector was enough to spur profit-taking over the previous two sessions in North America. Brent crude fell by 1.50% on Friday, with WTI falling 2.20% as markets grudgingly corrected a very overbought technical picture. Those losses were quickly unwound in Asia, with dip buying very much in evidence. Brent crude has rallied 1.50% to USD63.60 a barrel, and WTI has jumped by 1.55% to USD59.68 a barrel.

The falls on Thursday and Friday have taken the pressure off the very overbought Relative Strength Index’s (RSI’s) on both contracts. That reprieve may be temporary though, with today’s rallies lifting them near overbought territory again. That likely means that although oil remains bid, neither Brent crude nor WTI are likely to recapture their recent highs of USD65.50 and USD62.80 a barrel this week.

Attention will turn to the OPEC+ technical meeting next week with the grouping having some big decisions to make. With oil futures heavily in backwardation, indicating higher prices to come, OPEC+ will need to decide on whether to increase production, least US shale quickly returns to seize market share. Early indications are Saudi Arabia and Russia have divergent opinions. Rather than speculate this early in the week on OPEC+’s mindset, I am content to say that oil remains bid on dips and will stay that way.

Gold survives another day

Gold tested the critical long-term support at USD1760.00 an ounce on Friday, but a fall by the US dollar saved further fallout and sparked a mini-revival by the yellow metal. Gold finished the session 0.47% higher at USD1784.00 an ounce and has eked out a 50 cent gain this morning in dull trading.

The recovery by gold remains unconvincing and its technical picture remains grim. For now, the crypto market appears to have temporarily taken over the mantle of inflation head, for better or for worse. The best hope for gold at this stage is for the US dollar to move substantially lower this week, although recent price action suggests this only has the effect of stabilising gold prices, not turning the overall direction.

Gold needs to recapture the USD1800.00 an ounce region, and preferably USD1830.00 an ounce, before long positioning can start breathing again. The USD1760.00 an ounce 50% Fibonacci remains gold’s critical support zone. A daily close under USD1760.00 targets more losses to the 61.80% Fibonacci at USD1688.00 an ounce. Failure signals a deeper loss to the USD1600.00 an ounce area.