Oil Under Pressure as Gold Remains Steady

Oil edged lower Friday in energy commodities, finishing at the bottom of a tight trading range. Brent crude was down 0.25% to USD39.80 a barrel. TI climbed slightly by 0.50% to USD37.45 a barrel. 

Oil has edged higher in early Asian trading, both contracts up 15 cents. This was coat-tailing the positive start by equities.

Particularly for Brent crude, the technical picture remains ominous for both contracts though. The blockade of Libyan oil export terminals may be about to end will. And this announcement will add to the woes of OPEC+’s meeting this week. 

Libyan supplies are hitting an already saturated international market. That is just the news OPEC+ did not want to hear and likely explains Brent’s underperformance vis-a-vis WTI.

From a technical picture, Brent has traced a series of lower highs over the last week. Moreover, a contracting daily range, signalling another price breakout is coming. 

Also, it recorded a weekly close below its 100-DMA at USD40.00 a barrel. This is suggesting that the next significant move is down. 

Brent crude’s chart suggests that further losses to USD37.00 a barrel are the path of least resistance. And, the international supply/demand picture reinforces that view.

WTI’s 100-DMA has halted daily declines through all the last week. Today, it sits at USD37.20 a barrel, just below current levels. 

It is also showing a series of contracting ranges that implies a breakout is coming. A daily close below the 100-DMA suggests further losses to last week’s lows around USD36.00 a barrel. Possibly it can go as far as USD34.50 a barrel.

OPEC+’s virtual meeting this week is expected to be a fraught one. An abundance of supply,  possible return of Libyan exports, member compliance and a softer demand outlook, will unsettle the grouping. 

It is unlikely that OPEC+ will “blink” this week and signal a move back to higher production cuts. Supposing that as a base case, oil prices are vulnerable to deeper downward corrections this week.

Meanwhile, Friday’s performance has left gold anchored firmly in the middle of its one-week range. 

The Yellow Metal Remains Side-lined at this Time

Gold’s prices slipped slightly Friday in precious metals, falling a modest 0.30% to USD1940.50. That has left the commodity anchored firmly in the middle of its one-week range. 

It has weathered the storm of an equity sell-off last week. This should be pleasing for investors, but it appears that the financial markets attention is elsewhere for now.

It is likely that the status quo will continue until the FOMC meeting passes on Wednesday evening. That will give more visibility on monetary policy and the direction of the US dollar. 

That said, gold’s bullish longer-term fundamentals remain unchanged.

Gold has well-denoted support between USD1900.00 and USD1920.00 an ounce. Commodity news reported it had trendline resistance at USD1970.00 an ounce today.