Oil prices collapse overnight
A souring outlook for the global recovery as COVID-19 fears resurface, and it appears there is still plenty of speculative long positioning out there, contributed to another rout for oil markets overnight. Brent crude fell 6.0% to USD60.40 a barrel, and WTI fell by 6.40% to USD57.30 a barrel.
Oil has gained a reprieve in Asia with news that a ship has run aground and is blocking the Suez Canal. The potential disruption to supplies has lifted prices on both contracts by 1.0% today. The reprieve seems temporary, though, as the spot price fall overnight has completely removed the backwardation in the oil futures market for prompt deliveries. With speculative markets still long, it seems, oil is likely to be a sell on rallies until COVID-19 and economic recovery sentiment swings back into the black.
The falls overnight will put paid to any chance that OPEC+ will trim production cut targets, and their next meeting in April will seem like an age away. Overall, I regard the fall as a very deep correction, and remain optimistic that both the economic recovery, and by default, oil’s longer-term rally remains on track. There may well be more pain in the short-term to endure, however.
Brent crude has support at USD60.30 and USD60.00 a barrel. Failure opens deeper losses to USD57.50 a barrel. Resistance is now far distant at USD65.00 a barrel. WTI has a triple bottom at USD57.35, and failure sets the scene for deeper losses to USD55.00 a barrel. Resistance is at USD60.00 and USD62.50 a barrel.
Gold ranges quietly
Gold appears to be off most investors’ radars at the moment, the US dollar strength overnight pushing it slightly lower by 0.70% to USD1727.00 an ounce. The risk aversion sweeping Asian markets has seen it regain most of those losses, rising 0.40% to USD1733.00 an ounce.
With gold seemingly immune to higher US yields, lower US yields, and US dollar strength, it seems set to continue ranging between USD1720.00 and USD1750.00 an ounce, as part of a broader longer-term bottoming pattern. It will be interesting to see if it has recovered some of its forgotten risk-aversion mojo in the days ahead.
Gold’s overall price action remains construction, though, and the yellow metal is attempting to form a longer-term base, between its 61.80% and 50.0% Fibonacci retracements, setting the scene for a move back above USD1800.00 an ounce if all goes to plan.
Gold has support at USD1720.00 and USD1700.00 an ounce, followed by the 61.80%retracement in the USD1685.00 area. It has initial resistance at USD1755.00 an ounce, followed by the 50.0% retracement at USD1760.00 an ounce.