Oil falls on rouble report, gold extends slide

Oil slides on rouble buying plan

Oil markets were steady overnight as most of the news around the Russian gas ban on Poland and Bulgaria has been priced into the late New York session previously. In Asia, oil prices are sliding which I put down to a combination of two things. The start of mass testing around Beijing and the partial lockdown of the port city Qinhuangdao, and the FT article suggesting that major European energy companies will comply with Russia’s demands for payment in roubles. The collision course with the people who run Europe is being ignored for now.

Brent crude has fallen by 1.45% to USD 103.65 in Asia, with WTI falling by 1.50% to USD 100.50 a barrel. I have some doubts as to whether Europe’s politicians will allow its private energy companies to capitulate to the Kremlin. That may bring forward more weaponizing of gas supplies by Russia. In this case, any retreat in oil prices could be the eye of the hurricane.

Content to stay out of the schizophrenic day-to-day noise of oil’s price action, my bigger picture view is that Brent will remain in a choppy USD 100.00 to USD 120.00 range, with WTI in a USD 95.00 to USD 115.00 range.

Gold suffers from US dollar strength

The storm clouds are darkening for gold as it wilts in the face of US dollar strength, not helped by US yields also moving higher overnight. It seems that any risk-hedging buying is nowhere near enough to offset the selling pressure derived from US dollar strength.

Gold tumbled by 1.05% to USD 1885.50 overnight, falling another 0.40% in Asia today to USD 1877.50 an ounce. Gold is now eroding support at USD 1880.00 and is in danger of taking out its 100-day moving average (DMA), just below USD 1875.00 an ounce. The risk is rising of another capitulation trade pushing gold sharply lower to its original triangle breakout at USD 1835.00 and then support at USD 1820.00 an ounce.

Only a sudden reversal lower by the US dollar is likely to lift the pressure on gold now. It faces layered resistance at USD 1880.00 intraday, followed by USD 1890.00, USD 1915.00, and USD 1940.00 an ounce.

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Author: Jeffrey Halley