Oil retreats as short-term bullish sentiment fade

Both Brent crude and WTI retreated overnight as the short-term noise from equity markets spilt over into energy markets. Brent crude fell by 3.15% to USD 39.60 a barrel. The falls overnight, however, look more to do with position adjustments and short-term tail chasing, rather than a structural change of sentiment. Prices are unchanged in Asia today. In the bigger picture, both contracts have now fallen back to the middle of their one-month trading ranges. For Brent crude, this is USD 40.00 to USD 44.00 a barrel, and for WTI, USD 37.00 to USD 41.50 a barrel.

With OPEC+ discipline and compliance remaining high, the downside is unlikely to come under sustained pressure in the near-term. OPEC+ will almost certainly, not hesitate to extend the headline production cut number past July if oil prices falter. We may need evidence that the US has brought Covid-19 under control though, to spark a sustained rally beyond the present wider ranges.

Gold consolidates its gains above USD 1800.00

Gold traded in a USD 1795.00 to USD 1816.00 an ounce range overnight. As stock markets fell and the US dollar strengthened, gold retreated. It regained part of its setbacks though, to finish above USD 1800.00 an ounce at USD 1802.00 an ounce.

A close above USD 1800.00 an ounce is a pleasing technical development for bullish positioning, suggesting that the move higher continues to have resilience, despite the noise from other markets. Gold has support at USD 1790.00 an ounce with a break suggesting a deeper correction to USD 1775.00 an ounce. Above, gold has resistance at USD 1820.00 an ounce.

A weekly close above the USD 1800.00 an ounce level will be an extremely positive technical development from a longer-term perspective. With geopolitical tensions still rising, and likely to increase between the US and China over the weekend, gold should find plenty of risk hedging buyers on any dips today.