US crude inventories deepen oil’s woes

US Crude Inventories unexpectedly rose by 2.0 million barrels overnight, delivering an ugly kidney punch to oils tentative intra-day rally. The sell-off in US equities having already started the rot. Brent crude fell 2.20% to USD39.70 a Barrel, and WTI fell 2.05% to USD37.00 a barrel.

The inventory data will already add to frazzled nerves of oil speculators, confronted by a widening contango in the Brent futures curve and concerns about global consumption, as well as stale long positioning.

In the case of both contracts, their respective 100-DMA’s have managed to stop the rot over the past three sessions. Although oil in Asia has risen slightly with equities today, both Brent and WTI now are in danger of a stern test of this support into the week’s end.

Brent crude’s 100-DMA is at USD39.80 today, with a loss of that level opening further losses to USD37.00 a barrel. WTI’s 100-DMA is nearby at USD36.95 a barrel. A daily close below opens further losses to USD34.50 a barrel region.

For now, OPEC+ has stayed their hand regarding increasing production cuts. Should oil collapse further, and extend losses across next week, their hands may be forced. In the short-term, oil, like currency markets, will track equity price movements.

Gold is content to range trade

Gold fell short of testing trendline resistance at USD1975.00 an ounce overnight, fading with equities in the New York afternoon to close unchanged at USD1946.00 an ounce. That leaves Gold roughly in the middle of the USD1900.00 to USD1975.00 range as anticipated yesterday.

With gold moving in lockstep with Equity Markets, it is clear that recent price moves have not been a gold story alone, and hence we expect gold’s recent range to contain price movements. A fall in equity markets on Wall Street later today would likely see gold retest the USD1900.00 to USD1920.00 support zone. It is unlikely to break, as there appears to be plenty of willing buyers waiting patiently for dips in prices. Gold has edged five dollars lower to USD1941.00 an ounce in directionless Asian trading today.