Oil rallies on Colonial Woes
The Colonial Pipeline hack headlines over the weekend have lifted oil prices, as markets fear US supply line disruptions in refined products. Oil finished neutral on Friday; a surprising result given the moves in other asset classes.
Brent crude and WTI are higher by 0.50% to USD68.60 and USD65.15 a barrel, respectively, having given back some earlier gains. Realistically, the Colonial situation is a supply issue for refined products, and not crude, and hence, gasoline futures have climbed by 2.0% in Asia. If progress is made reversing the disruption and restoring systems, oil futures could see some short-term selling pressure.
With oil finishing nearly unchanged on Friday, it would seem that oil's upward momentum has waned somewhat, given the global recovery moves seen in other asset classes and a much lower US dollar. Therefore, Colonial aside, oil may be vulnerable to some abrupt long-covering sell-offs as the week progresses.
Brent crude has resistance at USD70.00 and thenUSD71.50 a barrel. The top of its ascending triangle breakout at USD68.00 is initial support, followed byUSD67.00 and v66.00 a barrel. WTI remains dead centre of its near two-month rising channel bounded by USD62.50 and USD67.00 a barrel. Only a failure of USD62.50 would disrupt the longer-term bullish picture. Interim support and resistance lie at USD64.00 and USD66.00 a barrel, respectively.
Gold’s impressive rally continues
I said some time ago that gold had traced out a cyclical low at its 61.80% Fibonacci at USD1680.00 an ounce. Gold’s retest and rally from that zone further cemented the case. After weeks of snail-like progress higher, gold has suddenly accelerated higher, driven by a weaker US dollar and ebbing fears of an early Federal Reserve taper.
To be sure, gold remains acutely vulnerable to US 10-year yields suddenly moving higher. But it seems that as long as the US 10-year remains anchored between 1.50 and 1.60%, gold’s upward momentum will remain unquenched.
Gold rose 0.90% to USD1831.00 an ounce on Friday, having tested USD1840.00 intra-session after the US payrolls data. It has again probed the upside this morning before falling back to USD1832.00 an ounce. Notably, it shows no sign of breaking back below USD1830.00 an ounce.
Gold has support at USD1830.00 and then USD1814.00 an ounce, Friday’s low. It has resistance at the Friday high of USD1843.50, followed by the 200-day moving average (DMA) at USD1852.00 an ounce. A close above the 200-DMA would be another bullish technical development, with only a closing below the 100-DMA at USD1797.00 an ounce casting doubt on the immediate bullish outlook.