On Friday, oil prices fell to earth, reflecting the general market retreat that swept asset classes as the week ended. Brent crude fell 3.90% to USD64.40 a barrel, and WTI fell 3.05% to USD61.95 a barrel. In Asia today, the news that Johnson & Johnson's (NYSE:JNJ) COVID vaccine has received FDA approval has lifted recovery sentiment in the commodity and energy space, raising prices. Brent crude rose by 1.50% to USD65.35 barrel, and WTI is climbing by 1.40% to USD62.40.
The rapid rebound reflects the tight physical market and the backwardation of the prompt and longer-dated futures curves. Asian buyers have eagerly sought the dip in prices today, with the OPEC+ Joint Technical Committee meeting on Thursday and Friday looming as oil’s key event for the week. At this stage, I expect a slight reduction in production cut targets to assuage the Russians and Iraqi’s, but OPEC+ is likely to remain content to kept Brent prices around USD65.00 a barrel.
That should ensure that oil prices remain supported on any dips this week, whatever the noise is emanating from other financial asset classes. Brent crude has support at USD64.40 and USD62.50 a barrel, with resistance at USD67.50 a barrel. WTI has support at USD61.00 and USD58.75 a barrel, with resistance at USD63.80 a barrel.
Gold has broken strategic support
Friday’s market rout saw gold prices collapse by 2.05% to USD1734.00 an ounce, with the yellow metal trading as low as USD1720.00 an ounce intra-day. Gold has now broken its strategic support at its 50.00% Fibonacci at USD1760.00 an ounce.
The vaccine-driven risk rally has lifted prices today, gold rising 0.85% to USD1749.00 an ounce, but it remains below the critical USD1760.00 pivot point. Gold remains acutely vulnerable to further deeper losses and needs to record a daily close above USD1760.00 today to alleviate those fears.
Otherwise, this appears to be a rally to sell into, which initially targets the overnight low at USD1720.00, followed by the 61.80% March to August Fibonacci at USD1680.00 an ounce. Failure heralds further losses to the USD1600.00 region.