Is WTI Oversupply Here to Stay?

Gold trades virtually unchanged

gold

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Gold slid yesterday, hit support one dollar above the psychological level of 1200 (S1) and rebounded to trade again around 1210 (R1), virtually unchanged. The picture is still negative and I would expect the metal to eventually extend its declines. But given that there is still positive divergence between both our short-term oscillators and the price action, I would prefer to wait for momentum and price action to confirm each other before getting again confident on the down path. On the daily chart, gold stays below the neckline of the inverted head and shoulders completed on the 12th of January. This supports the negative outlook and strengthens the likelihood for further declines in the not-too-distant future.

• Support: 1200 (S1), 1190 (S2), 1185 (S3).

• Resistance: 1210 (R1), 1222 (R2), 1238 (R3).

WTI shoots up after finding again support near 48.65

wti

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WTI hit support again near the 48.65 (S2) zone and shot above 50.00 (S1) again, confirming the positive divergence between the near-term momentum studies and the price action. Nevertheless the price was halted marginally below the 51.30 (R1) resistance hurdle and thereafter retreated somewhat. Although I would expect WTI to continue lower and challenge the 50.00 (S1) zone as a support this time, the possibility for a higher low near that psychological zone is high. As a result, I would consider the short-term bias to have shifted to the upside. On the daily chart, WTI is still trading below both the 50- and the 200-day moving averages, keeping the longer-term downtrend intact. I would treat any possible near-term upside extensions as a corrective move before the bears pull the trigger again.

• Support: 50.00 (S1), 48.65 (S2), 47.40 (S3).

• Resistance: 51.30 (R1) 52.50 (R2), 53.40 (R3) .

Oil prices surge

Oil prices surged yesterday after Saudi oil minister Ali Al-Naimi said that demand is growing and the market has turned “calm.” Personally I can’t understand why people listened to him talk his book when the US Department of Energy figures out the same day showed US inventories soaring by 8.4mn barrels during the latest week, double the 4.0mn barrels that was expected (and above the previous week’s 7.7mn). This is not the first time that oil prices have bottomed shortly after the figures came out and surged afterwards. I can’t explain it, but I don’t think it represents a fundamental change in the supply/demand picture. My guess is it was simply a technical move and as the oversupply still exists, I would remain cautious. Nonetheless, it is true that gasoline prices have stopped falling in the US (see below) and sales of larger cars have taken off, so it may be that demand is starting to respond to prices.

us oil

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