Crude Inventories offset OPEC+ nerves

Official US Crude Inventories and Gasoline Inventories fell by much higher than expected totals overnight, leading to an intra-day spike in crude prices. However, subtle hints from Saudi Arabian and Russian officials about oil production and inflation muted the gains. Oil markets shifted higher the probability of a move by OPEC+ next week to open the taps.

Still, Brent crude managed to finish 0.90% higher at 75.40 a barrel, while WTI rose just 0.25% to USD73.25 a barrel. Headlines suggesting that the US is open to continuing nuclear talks with Iran, despite a new hard-line President, has seen oil edge lower in Asia, both contracts shedding 15 cents a barrel.

With OPEC+ to meet next week, the possibility that US/Iranian talks are not dead in the water, and the relative strength index (RSIs) on both contracts in overbought territory, oil is vulnerable to a short-term correction lower after a mighty rally. A speculative long washout should be limited to USD73.00 for Brent crude, and USD70.00 a barrel for WTI. Unless OPEC+ massively opens the taps next week, any material dip should be short in duration.

Gold’s recovery hits a brick wall at 1800.00

Choppy range trading continued in gold overnight, with markets generally struggling to settle on a unifying theme, something that has typified the trading across several asset classes this week. Gold rose seventeen dollars to test its 100-DMA at 1793.00 overnight, only to retreat as Fed Officials Bowman and Bostic comments erred on the hawkish side of the inflation/interest rate divide.

Gold finished almost unchanged at USD1777.00 an ounce, easing 0.30% lower to USD1774.00 an ounce in Asian trading. With a lack of clear direction, and contradictory themes coming from Fed officials, I expect gold to continue its choppy range-bound trading. It is bordered by support at USD1760.00 and resistance at the 100-DMA at USD1793.00, followed by USD1800.00 an ounce. I expect this range to hold until the end of the week.

The market remains nervous about earlier lift-off entrenched inflation-type headlines. Its inflation-hedging correlation being weak versus its correlation to the US dollar and US yields for now. So, gold will stay a sell on rallies, although a weak RSI suggests that gold’s path of least resistance could be higher, given the right driver. That could be a much weaker US Durable Goods print this evening.