Crude Oil Prices May Not Find Lasting Support in OPEC+ Efforts

CRUDE OIL & GOLD TALKING POINTS:

• Crude oil prices may overlook OPEC+ efforts to sustain output cuts
• Demand drop amid the Covid-19 outbreak undermines supply policy
• Gold prices up with stocks as haven demand for the US Dollar cools

Crude oil prices continue to echo market-wide sentimenttrends. The WTI benchmark rose alongside US stocks yesterday in a broad upswell in risk appetite. Energy, materials and industrials – some of the hardest-hit sectors amid the Covid-19 pandemic – outperformed on Wall Street.

That seemed to hint that investors’ cheer was linked to hopes that the virus might be contained relatively soon. This is despite still-raging outbreaks in parts of the US, Australia’s state of Victoria, and elsewhere. Encouraging reports about vaccine trials might have helped.

The spotlight now turns to an OPEC+ ministerial meeting, where the cartel-led group of major producers may agree that some members who have fallen short of their obligations in an output-cut scheme will continue to restrain production after the program expires at the end of this month.

Whether the markets would find this encouraging for oil prices remains to be seen however. Limiting production is an uplift if it creates scarcity, but that is challenging when the deepest recession in decades has made demandanemic.

Tellingly, inventories are hovering within a hair of record highs. That won’t be easily altered by the slight drop in US storage expected to arrive with weekly EIA statistics due today, even if the fall prints closer to the 8.3 million barrels flagged by API yesterday rather than the meager 88k expected by analysts.

GOLD PRICES UP WITH STOCKS AS US DOLLAR FALLS

Gold prices also rose yesterday as investors’ risk-on disposition translated into losses for the haven US Dollar, pushing the currency lower and boosting the appeal of anti-fiat alternatives. A modest rise in bond yields probably trimmed scope for gains for non-interest-bearing bullion however.

Bellwether S&P 500 futures are pointing convincingly higher, hinting that a positive sentiment backdrop might make for more of the same ahead. Headline sensitivity remains elevated however, opening the door for abrupt reversals in market mood that stoke kneejerk gold price volatility.

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are wedged between support a rising trend line set from late May and resistance in the 42.40-43.88 area. A break upward confirmed on a daily closing basis probably exposes the $50/bbl figure. Alternatively, clearing support sees the next key inflection at 34.78.

Crude oil price chart created using TradingView

GOLD TECHNICAL ANALYSIS

Gold prices continue to idle abovethe 38.2% expansion at 1789.78. The next layer of resistance is at 1827.82, the 50%level, with a daily close above that exposing the 61.8% Fib at 1864.86. Alternatively a breach of support would neutralize the near-term uptrend and is likely to target 1747.74 next.

Gold price chart created using TradingView

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