Crude Oil Prices Shrug at OPEC Output Cuts, Chart Hints at Top

CRUDE OIL & GOLD TALKING POINTS:

  • Crude oil prices shrugged off an OPEC decision to prolong its output cut scheme
  • Gold prices drop most in over a year as yields, US Dollar rise on US-China truce
  • API inventory flow data, comments from NY Fed President Williams now in focus

Crude oil prices stalled at the start of the trading week. An intraday rise courtesy of buoyant risk appetite after the US and China restarted trade negotiations fizzled intraday. That was accompanied by a rise in bond yields, suggesting markets took the thaw to mean that the Fed may not need to deliver quite as much easing as recently envisioned. This soured sentiment, sending the WTI contract lower alongside stocks.

Meanwhile, gold prices suffered the largest tone-day drop in over a year. The move began as a reflection of cooling US-China trade war worries and gathered steam as moderating Fed rate cut prospects drove the US Dollar higher alongside benchmark lending rates. That understandably undermined the appeal of anti-fiat and non-interest-bearing assets epitomized by the metal.

CRUDE OIL EYES US INVENTORY DATA AFTER OPEC FAILS TO EXCITE

Looking ahead, the spotlight turns to API inventory flow data. Yesterday’s decision by OPEC-led producers to prolong a coordinated output cut scheme through March 2020 ultimately failed to inspire lasting gains. That might reflect downbeat demand bets against the backdrop of slowing global growth. Such fears may be bolstered if stockpiles shed less than the expected 2.3 million barrels.

Scheduled comments from New York Fed President John Williams are also of note. The influential policymaker is often seen as reflective of the majority view on the rate-setting FOMC committee. If he suggests that the markets have overreached in their call for three rate cuts alongside the end of QT balance sheet reduction before year-end, gold prices might suffer further.

Get the latest crude oil and gold forecasts to see what will drive prices in the third quarter!

GOLD TECHNICAL ANALYSIS

Gold prices retreated below support at 1392.08, the March 2014 high. That puts a dense block of former resistance levels running down through 1346.75 back in focus. If sellers manage to breach below this, a broadly bearish bias may be re-established. The topside looks to be capped near 1433.85, the confluence of the August 2013 high the underside of support-turned-resistance set from December 2016.

Crude Oil Prices Shrug at OPEC Output Cuts, Chart Hints at Top

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices continue to oscillate below support-turned-resistance in the 60.39-95 area, with negative RSI divergence still hinting that a turn lower might be brewing ahead. A break below support at 57.24 confirmed on a daily closing basis opens the door for a test of the 54.55-55.37 zone. Alternatively, a move above resistance paves the way to challenge the 63.59-64.43 region.

Crude Oil Prices Shrug at OPEC Output Cuts, Chart Hints at Top

COMMODITY TRADING RESOURCES

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

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