Oil’s rally looks over
Oil’s one-week rally looks well and truly over, with risks swinging quickly to the downside. It appears that US oil and gas production is returning rapidly after Hurricane Delta passed. Combined with the end of the Norwegian oil workers strike, and the opening of Libyan output once again, oil’s supply-demand fundamentals have ended the honeymoon as quickly as it began.
Brent crude fell through its 100 and 200-day moving averages overnight (DMA) at USD42.35 a barrel, on the way to a 2.40% loss to USD41.75 a barrel. A failure of support at USD41.25 a barrel, opens up deeper losses to USD39.00 a barrel, last week’s lows.
WTI fell through its 100-DMA overnight at USD38.85 a barrel; finishing the session 2.60% lower at USD39.45 a barrel. WTI faces further downside tests with support initial at USD38.40 a barrel, its 200-DMA; before potentially targeting last week’s lows at USD36.70 a barrel.
We have had no word yet from OPEC+ about modifying production cut targets, but one imagines that such action will be needed sooner rather than later.
Gold consolidates recent gains
Gold markets were relatively quiet overnight, and further profit-taking after recent substantial gains is evident in Asia today. Gold fell 0.40% to USD1923.00 an ounce overnight and has eased another 0.40% to USD1915.50 an ounce in Asia.
Part of the reason is gold’s inability to break through trendline resistance at USD1929.00 overnight, which seems to have spurred short-term traders to lock in profits. A stronger US dollar in Asia is also a factor in the absence of any major news stories today to stir volatility.
Gold appears to be settlings into a USD1900.00 to USD1930.00 an ounce trading range for now while it awaits developments elsewhere. The trendline resistance is followed by the 50-DMA at USD1935.00 an ounce. A daily close above that level should open further gains to the USD1970.00 an ounce area in the days ahead. Only a failure of USD1880.00 an ounce negates the near-term bullish outlook.