IEA raises oil consumption forecast
The peak-virus positivity of Friday saw both Brent and WTI record 2.0% gains in the New York session. That was assisted by the International Energy Agency raising its global oil consumption forecast during Wall Street’s session. That optimism has faded this morning as various press outlets highlighted the “taper-tantrum” risk this week from OPEC+.
Brent crude and WTI have faded by 1.0% in Asia to USD 42.90 a barrel and USD 40.30 a barrel respectively. Despite the noise, all both contracts have done is now ease back nearer the middle of their one-month ranges. That is USD 40.00 to USD 44.00 a barrel for Brent crude, and USD 38.00 to USD 42.00 a barrel for WTI. Neither contract is displaying the momentum to challenge the upside boundaries for now, and choppy range trading is set to continue in the first half of the week.
The reason that oil has not joined the peak-virus party today is OPEC+’s impressively titled Joint Ministerial Monitoring Committee (JMMC). As readers may recall, OPEC+’s headline 9.6 million barrel a day cut was extended until the end of July. After that, the agreement has the member countries tapering the production cut figure in the months ahead. The JMMC will meet on Wednesday to decide whether to extend the headline cut or proceed with the arrangement as previously agreed. Much has been made of a possible oil market “taper-tantrum” if production cuts are eased. However, I am 50/50 on the decision, with persuasive arguments to be made for either course of action. Expect oil to remain in choppy range trading until the JMMC’s recommendations are made public.
Gold prices remain sturdy
The bullish sentiment sweeping equity markets on Friday had little effect on gold prices, leading to a steady finish. Gold was supported by a weaker US dollar, edging lower by only 0.20% to close at USD 1799.00 an ounce.
In Asia, gold is showing real strength today. Despite strong equity markets, a weaker US dollar is again lifting prices, gold climbing 0.30% to USD 1803.50 an ounce. Gold’s price action will be pleasing for bullish traders, with the yellow metal showing strong resilience to hold USD 1800.00 an ounce, even if it lacks the momentum to grind higher.
Gold has support between USD 1780.00 and USD 1790.00 an ounce, with resistance at USD 1819.00 an ounce. Only a fall below USD 1760.00 an ounce changes the bullish outlook. Last week’s quick spike to USD 1819.00 an ounce looks increasing stop-loss, options and algo-driven. With equity markets in positive territory, market participants feel comfortable picking up gold on dips to USD 1800.00 an ounce, rather than needing to chase prices higher. A decent period of consolidation at these levels strengthens the case for more gains soon.