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Oil markets enter a pre-OPEC+ holding pattern

Oil markets once again traded sideways overnight, albeit with a slight upward bias. Brent crude and WTI were almost unchanged at USD75.50 and USD73.30 a barrel. Both contracts have added 15 cents a barrel in a subdued Asian session today.

 

Although physical demand has kept prices on both contracts comfortably at the top of their ranges this week, oil is now vulnerable to a short-term correction lower. The relative strength indexes (RSIs) on both contracts have moved well into overbought territory, which is typically a decent signal of an impending correction. US dollar strength this evening, or tap-opening rhetoric from OPEC+ officials, either today or over the weekend, could be enough to deliver a sharp correction lower.

 

Any washout of speculative long positions should be short in duration, as oil’s physical fundamentals remain very supportive. Thus, Brent crude could correct to near USD73.00, and WTI to USD70.00 a barrel. Unless OPEC+ massively opens the taps next week, however, any selloff will be short-lived.

 

Gold remains side-lined

Like equities and energy, precious metal markets remain in wait-and-see mode, with gold edging just 0.23% lower to USD1774.00 an ounce in another range-trading session. In Asia, weekend risk hedging has seen it unwind those modest losses today, nudging 0.20% higher to USD1778.50 an ounce.

 

Gold remains locked in a USD1760.00 to USD1800.00 an ounce range, with the 100-DMA, today at USD1793.50 an ounce, capping gains. As ever, gold’s fate will be decided by other markets, notably the US dollar’s direction. Its RSI, though, remains near oversold levels, and I believe gold may yet retest its resistance zone around USD1800.00 an ounce before the week finishes as the bounce of support at USD1760.00 an ounce was quite strong.

 

In the bigger picture, gold needs to complete a daily close above USD1800.00 an ounce, or below USD1760.00 an ounce, to signal its next directional move. Otherwise, patience is required in a range-trader’s market.