Yesterday energy traders decided to forget about how tight the oil market remains and took some risk off the table as Wall Street hit the sell button with every risky asset over rising geopolitical concerns. President Biden believes there is still a high risk for a Russian invasion of the Ukraine and that will be the primary catalyst for risk appetite.
Oil prices are on sale and whatever weakness is happening will likely be short-lived. Geopolitical tensions should be bullish drivers for crude prices and the risk of $100 oil is still very high over the short-term if Russia invades Ukraine.
WTI crude is resting at the $90 level and if the pullback continues, massive support lies at the $85 level. Even if energy traders become convinced an Iran nuclear deal will happen, the oil market is too tight for prices to fall below the mid-$80s.
Gold pushes higher on Ukraine crisis
A month ago, no one wanted to touch gold. Now gold has suddenly become the flavor of the month, now that investors are scrambling for safe havens as geopolitical risks intensify and fears grow that the central banks might go overboard with tightening monetary policy. A sea of red on Wall Street has sent gold above the $1900 level and investors might see further bullish momentum if the Ukraine situation intensifies. Earlier de-escalation in Russia-Ukraine tensions in the week have been completely undone and now it seems the risks of an invasion are growing.
Gold has key resistance around the $1920 to $1930 zone, but if the haven bid remains strong, bullish momentum could support a move towards the $1970 level.