Oil consolidates ahead of OPEC Monitoring Committee

A positive session on Wall Street, led by energy stocks, gave a gentle boost to oil prices overnight. Brent crude rose 0.35% to USD 43.00 a barrel, with WTI climbing 0.50% to USD 40.50 a barrel.

Trading in Asia is very quiet, both contracts are unchanged with prices balanced between US-China trade concerns, and the vaccine sentiment booster shot. The OPEC monitoring committee meeting this afternoon will dictate oil’s next move.

The balance of probabilities suggests that the likelihood of a recommendation to extend the headline production cuts for one month is more likely. That is unlikely to spur vigorous buying of oil but should be enough to maintain it at the higher end of its one-month trading range. Nagging doubts over the US recovery is limiting the upside.

A recommendation to begin tapering the cuts as per the original OPEC+ agreement may weigh on prices, especially if the vaccine sentiment fades. Although the cuts would be modest in scale, it may be enough to see stale speculative long positioning continue to reduce exposure. Key support levels are USD 40.00 a barrel for Brent crude and USD 37.50 a barrel for WTI.


Gold remains steadfast

Gold rose 0.45% to USD 1809.50 an ounce overnight, repelling yet another test below USD 1800.00 an ounce in a choppy session. Gold has now managed this feat for seven consecutive trading sessions and is consolidating nicely, even if it lacks the momentum to attack the topside for now.

Gold’s big test will come if equity markets move materially lower in a short space of time. That has usually resulted in gold following suit since March. Otherwise, gold is continuing to consolidate nicely, as it builds strength for its next leg higher.

Gold is almost unchanged today in Asia, easing two dollars to USD 1807.50 an ounce in a directionless session. Critical support lies below between USD 1780.00 and USD 1790.00 an ounce, with resistance continuing at USD 1820.00 an ounce.