Oil tumbles on thin liquidity

Oil gave back all of its previous day’s gains overnight, as oil futures markets tumbled in holiday-thinned liquidity. Brent crude fell 2.30% to $47.70 a barrel, tracing out a bearish outside reversal day in the process. WTI fell 1.90% to $45.00 a barrel. With much of oil’s rally in November built on expectation, sentiment and speculative fast money, some sort of correction was long overdue. A thin market and the OPEC+ Ministers meeting on Monday seem to have been the precursors for traders to lighten bullish positioning.

Oil has rallied modestly in Asia, Brent crude climbing 20 cents to $47.90 a barrel, while WTI has crept 10 cents higher to $45.10 a barrel. Trading is muted though, and the outside reversal day traced by Brent crude overnight suggests that prices are vulnerable to more downside pressure. Both contracts relative strength indexes (RSI) remain near very overbought levels.

Brent crude has traced a near-double top at $49.00 a barrel with support at the overnight low of $47.55 a barrel. Should that fail, Brent crude could extend losses to $46.00 a barrel. WTI has resistance at Wednesday’s high at $46.25 a barrel, with support at the overnight low at $44.75 a barrel, which is also a double bottom. Failure should see WTI’s retreat continue, possibly extending as far as $43.00 a barrel.


Gold remains vulnerable

Gold finished a holiday-thinned session almost unchanged at $1810.50 an ounce overnight. In Asia today, and equally tepid session has seen it edge lower to $1808.00 an ounce. Gold remains trapped in a $1800.00 to $1820.00 an ounce range, with the risks definitely tilted to the downside as the dip-buying seen after previous large falls remain absent.

Support at the 200-day moving average (DMA) is nearby at $1799.50 an ounce this morning. Resistance is at $1820.00 an ounce and $1840.00 an ounce. A weekly close below the 200-DMA would be a very bearish technical development. Failure suggests deeper losses to $1757.00 an ounce initially, and then the $1700.00 an ounce region.

Gold’s RSI has moved away from extreme oversold territory, further compounding its cloudy technical picture. Early closes on US equity and bond markets today threaten to compound its woes, with the price action of recent days suggesting the market remains heavily long.