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Crude oil: All eyes on Saudi as US curbs on Iran set to take effect; gold continues to shine

By Pritam Kumar PatnaikCrude oil and gold continued to attract much of investor focus in the commodities market through the…

By Pritam Kumar Patnaik

Crude oil and gold continued to attract much of investor focus in the commodities market through the week. Med barely days to go before the US sanctions are enforced on Iranian crude, the oil market is watching how Saudi responds to the situation.

Meanwhile, the global equities selloff has kept gold in the limelight amid safe haven demand. Men det er fortsatt at være set hvor meget upside kan det gule metal se i denne runden.

Crude Oil

Crude oil prices continued to be influenced by Iran’s news and weakness in global equity markets. Oil started the week on a negative note after Saudi Arabia’s promise to raise production to a record high, two weeks before US sanctions potentially choke off Iranian supplies.

Reuters quoted Saudi Energy Minister Khalid al-Falih as saying that his country had no intention of unleashing a 1

973-style oil embargo on Western consumers, but rather was focused on raising output to compensate for supply losses elsewhere, such as Iran. Falih also said Saudi Arabia would soon increase output to 11 million barrels per day (bpd) from the current 10.7 million. He added that Riyadh had capacity to increase production to 12 million bpd.

Meanwhile, prices also fell after hedge funds and other money managers cut their combined net long position in the six most important petroleum futures and options contracts by 133 million barrels in the week to Oct. 16, according to exchange and regulatory data.

Fund managers have cut their combined position by a total of 187 million barrels in the last three weeks after earlier raising it by 196 million barrels in the previous five weeks. The selloff in global equity markets raised concerns about demand growth for oil and also weighed on sentiments.

Data sales, US commercial crude oil stocks rose for a fifth consecutive week last week, increasing by 6.3 million barrels to 422.79 million barrels, the Energy Information Administration said. Additionally, Cushing’s crude stocks rose to 33 million barrels on Tuesday, almost 1.8 million barrels from the previous week. Output remained unchanged at 10.9 million barrels per day (bpd), slightly below a record 11.2 million bpd reached at the beginning of October.

Upside remained limited Saudi Arabia’s Opec Governor Adeeb Al-Aama said that the oil market in the fourth quarter could be shifting to a surplus situation, som det fremgår af stigende varebeholdninger i løbet af de sidste par uger.

The domestic market tracked overseas prices and traded lower. Rupee appreciated marginally this week and limited upside. Looking ahead, prices could continue to remain under pressure as traders and investors focus shift to potential oversupply situation in the markets.

However, markets could continue to focus on the Iran issue and the details of the sanctions are expected to be out on November 4. So prices could continue to consolidate near the $ 75 a barrel level for Brent.

Technically, MCX Crude is trading near its 21-weekly moving average on the weekly chart, which is placed at Rs 4,896 level, which can act as a immediate support and can provide some relief since its last three weeks which indicates an upside movement in the counter.

On the daily chart, Crude Oil has taken a strong support of its Rising Trend Line formation, and it is trading near its 100-DMA which suggests a bounce back movement in the counter.

Based on above technical structure, we expect a bounceback in MCX Crude Oil in the upcoming sessions. One can buy Crude Oil around Rs 4,850-4,900 with a stop loss Rs 4,730 and target of Rs 5,200.

Gold

International gold prices rose this week as investors looked at other asset classes after the global sell-off in the equity markets. World shares sank to their lowest level in a year, pressured by disappointing corporate earnings, Saudi Arabia’s diplomatic isolation to a brewing argument about Italy’s finances.

The European Commission decided to reject Italy’s 2019 budget and asked Rome to present a new document within three weeks. Men, upside in the US dollar limited upside in gold. The Euro’s weakness helped the dollar this week.

The Euro fell to a two-month low this week after European Central Bank President Mario Draghi said the bank would pursue its tightening policy in spite of fears about the monetary union’s economic and political future.

The ECB reaffirmed that its 2.6 trillion euro ($ 2.97 trillion) asset purchase program will end this year and that interest rates could rise after next summer. De politiske vejledning har været konsekvent siden juni, selv om de økonomiske udsigterne er blevet mørket, mens politiske uro i Italien looms over the currency bloc.

Although Draghi said he was confident the European Commission and Rome would reach a compromise on Italy’s budget plans, he failed to address concerns about the risk of contagion from surging borrowing costs.

Datawise, SPDR Gold Trust said its holding rose rose 0.51% to 749.64 MT this week from 747.88 MT seen during the previous week. Additionally, Reuter’s data showed Gold ETF also saw some inflows and the holdings rose 0.12% to 1663.702 MT this week from 1661,705 MT seen during the previous week.

Domestic bullion prices on the futures remained range bound. De priser gjorde først oversøiske priser, men ved slutningen af ​​ugen sluttede landet på den tilbagevenden af ​​styrkelsen af ​​indenlandsk valuta.

However, in the spot markets, Gold prices extended their rally this week to trade at an over six-year high of Rs 32,625 per 10 gm, the highest level since November 29, 2012, when the precious metal had been closed at Rs 32,940 per 10 gm. Hogere globale prijzen, een pick-up in feestelijke en huwelijksseizoen door lokale jewellers en een zwakkende rupee lifted goudprijzen.

Looking ahead, third quarter US GDP data is due on Friday and a lower-than-expected reading could cause concerns about economic growth momentum and whether that could possibly lead to a change in the Fed’s monetary tightening path. So this could support gold prices.

However, a hawkish nod and an optimistic view of the US economy from Fed Vice Chair Richard Clarida, US President Donald Trump’s most recent addition to the Federal Reserve Board, has increased the odds of a rate hike in December, denting the appeal of gold slightly.

Technically, MCX Gold is trading in Rising Channel formation and is facing a resistance of Upper Band of its channel around Rs 32,400 level on the weekly chart, which suggests some downside pressure where a confirmation will be clear once it sustain below Rs 31,850 level.

Additionally, daily momentum indicator MACD has given negative crossover which suggests a negative breath in the counter. Basert på ovennevnte tekniske struktur, forventes en mindre korrigering i MCX Gold i kommende sessioner, så man kan selge gull rundt Rs 32,000-32,100 med en stoppetab på 32,400 og et mål på Rs 31,600.

(Pritam Kumar Patnaik is Head of Reliance Commodities. Investors are requested to consult their financial advisers before taking any investment decision based on the observations made in this article.)

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