WTI crude fell 3.78% to $66.11 per barrel on Tuesday morning.
Brent fell back below $70 per barrel for the first time since 2021.
Fundamentals have not changed to warrant a big price dip.
Oil prices fell again on Tuesday—by more than 3% on the day—indicating a dramatic shift in fundamentals or some geopolitical tension in the oil-rich Middle East. Only neither of those things has happened—at least not today.
By 10:30am EDT on Tuesday, the price for a barrel of Brent crude oil had fallen by $2.33 (-3.24%) to $69.51—the lowest price in years. WTI crude had fallen by $2.60 (-3.78%) per barrel to $66.11.
But fundamentals have not changed to warrant such a price dip. The API hasn’t issued any figures, nor has the EIA. The world’s largest oil consumer, the United States hasn’t released any significant economic data, for better or for worse.
The only relevant data marker that was released today is customs data about China’s exports, published by Reuters, which grew at a quick pace in August as manufacturers moved to get under the wire of upcoming tariffs. China’s imports, however, were a disappointment, rising only 0.5% instead of the 2% that was anticipated, and a lower growth than in the month prior.
Later today, the American Petroleum Institute will offer its estimate of crude oil and crude oil products inventory movements in the United States. Tomorrow, the Energy Information Administration will offer its estimate of the same.
Brent crude is now trading down $4 from this same time last week, with WTI trading down $4 week over week.
Earlier this week, Morgan Stanley reduced its forecast for Brent crude for the second time in two weeks, now expecting an average of $75 per barrel in Q4—a serious downgrade from its August predictions for Q4 of $80, comparing the trend in Brent prices to “other periods with considerable demand weakness.”
The 2024 adjustment, Cochilco said in a report, was related to “macroeconomic weakness in the main consuming countries” and “the postponement of the start of the monetary policy rate reduction cycle in the United States”.
The commission also cited “geopolitical uncertainty and the accumulation of inventories in the Asian market,” but noted prices would remain above $4.00 per pound – a key level it expects to be maintained over the next decade.
Cochilco also said that Chile’s copper production is expected to increase by 3% in 2024 from the previous year to 5.41 million metric tons, short of the previously estimated 5.5 million tons.
In 2025, production would grow 6% to 5.7 million tons, Cochilco added. The Andean country is the world’s largest copper producer.
The commission added that the refined copper market is anticipated to be roughly balanced in 2024 and 2025.
“It is estimated to be in a slight deficit in 2024, with 12,000 tons, and surplus in 2025, with 13,000 tons,” markets coordinator Victor Garay said. “This forecast implies a relevant change from the previous estimate, when a deficit was foreseen.”
(Reporting by Fabian Andres Cambero; Writing by Natalia Siniawski; Editing by Gabriel Araujo)
The West Texas Intermediate Crude Oil market has seen a bit of a drop, only to turn around and show signs of life again.
By doing so, it shows that there is at least some fight left in the market, despite the fact that we have been falling quite rapidly over the last couple of weeks.
I believe at this point in time the Crude Oil market is going to continue to pay close attention to the $68 region, as it is an area that has been important and significant support in the past. Rally and from here would be expected due to the fact that we are so oversold, but the real question will be asked about whether or not we can get above the $72.50 level, as it is an area that a lot of people have paid close attention to in the past, and I think ultimately, we’ve got a scenario where people will be waiting to see whether or not the previous support should then offer significant resistance in a phenomenon known as “market memory.”
Global economy
Keep in mind that the global economy looks precarious at best, and I think a lot of people are going to keep an eye on crude oil as a way to express what they believe when it comes to global growth. After all, oil is essentially the “lifeblood” of the global markets, so if there is a significant drop in economic growth, that means there will be a significant drop in crude oil. That’s essentially what’s been going on for the last couple of weeks, and now the question will be whether or not we see any follow through.
If we were to break down below the lows of the last couple of days, we could see oil really start to drop drastically. On the other hand, I think we got a situation where we are trying to find the floor, and therefore it could be choppy and noisy over the next couple of sessions.
Gold prices return to the red on early Tuesdays but remain in a familiar range near $2,500.
The US Dollar holds recovery amid US Treasury bond yields bounce and souring sentiment.
For how long can Gold buyers defend 21-day SMA at $2,499? The daily RSI stays bullish for now.
Gold price is trading on a slippery slope, battling $2,500 in Tuesday’s trading so far. Despite a minor retreat, Gold price remains within its recent range, with traders refraining from placing fresh bets on the bright metal ahead of critical US Consumer Price Index (CPI) data due on Wednesday.
Gold price is challenging the critical short-term daily support level, now at $2,499, yet again amid a modest uptick in the US Treasury bond yields and sustained US Dollar strength. The return of risk-off flows in Asia, in the face of looming concerns over a Chinese economic slowdown, keeps the haven demand for the US Dollar supported even as markets lower bets for a 50 basis points (bps) interest rate cut by the US Federal Reserve (Fed) next week.
A weak US labor market report failed to convince markets of an outsized rate cut by the world’s most powerful central bank this month amid lingering US ‘hard-landing’ fears.
Markets are currently pricing in a 29% chance of a 50 bps rate cut move, down from about 47% seen pre-NFP data release, the CME Group’s FedWatch Tool shows. About 110bps worth of cuts are priced in for the rest of the year.
Against this background, the Wall Street indices rebounded firmly but the US Treasury bond yields downtrend enabled the non-yielding Gold price to stage a brief comeback on Monday.
All eyes remain on the US inflation data due
on Wednesday. The data is likely to ramp up volatility around the US Dollar and, in turn, the Gold price. US inflation data will be key to determining Fed rate cuts beyond September.
In the meantime, Gold price will remain at the mercy of risk trends, in the absence of top-tier US data on Tuesday. Additionally, the Fed entered its ‘blackout period’ on Saturday ahead of the September 18 policy decision, leaving Gold price gyrating in a familiar range.
Gold price technical analysis: Daily chart
Nothing seems to have changed for Gold price from a short-term technical perspective, as buyers continue to stay hopeful so long as the 21-day Simple Moving Average (SMA), now at $2,499, is being defended.
The 14-day Relative Strength Index (RSI) has turned slightly lower, still remains well above the 50 level, supporting the bullish bias.
After recapturing the $2,500 level on a daily closing basis on Monday, Gold buyers now aim for the record high of $2,532, above which the $2,550 psychological level will come into play.
If Gold price faces rejection once again near the $2,530 supply zone, a correction would ensue, with a daily closing below the 21-day SMA at $2,499 needed for a sustained downside.
A breach of the latter will challenge the previous week’s low of $2,472, followed by the symmetrical triangle resistance-turned-support at $2,461.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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Last week’s price range is relatively large, from 2.075 to 2.29 and natural gas could trade within that range all this week. Nevertheless, it marks the key near-term support and resistance levels. In addition, the 2.29 price level should be used along with 2.30. The 2.30 level is more significant as it marks the breakout level of the double bottom. Also, notice that the 50% retracement is near last week’s low at 2.085.
Pullback May Test Lower Prices
Natural gas showed signs of strength last week that should be followed by further strength, unless negated. On Friday, it was able to close above the 200-Day MA, currently at 2.255, for the first time since July 1. But today, natural gas has fallen back below the 200-Day line. In addition, last week completed a measured move relative to the most recent prior upswing, which is from the rally off the first recent bottom at 1.88. The rally off that low was 22.3%, and the current advance completed a 22.4% rally from the second bottom, as of last week’s high. It adds to the potential for resistance around the 2.29/2.30 price zone.
Key Near-Term Support at 2.075
If natural gas continues to weaken but stays above last week’s low, it will continue to be poised for an upside breakout of the double bottom pattern. A drop below 2.075 may increase the time for a retracement to occur and could put at risk the potential double bottom pattern. A bullish reversal on the weekly chart was triggered last week and it indicates a likely continuation higher. That may change though if the 2.075 level is broken to the downside.
An upside bullish breakout of the double bottom will trigger on a move above 2.30. It will then need to close above it to confirm the strength of the breakout. There will then be the potential for natural gas to test resistance around the top trendline, which is near the 78.6% retracement at 2.89. Lower price targets are marked on the enclosed chart.
For a look at all of today’s economic events, check out our economic calendar.
Brent Crude oil prices are set to drop into the $60s per barrel range soon, according to one of the largest independent oil traders, Trafigura.
Brent Crude, the international benchmark, was trading at $71.63 a barrel, up by 0.65% on the day, early on Monday, as both benchmarks rebounded following a major selloff last week. Oil prices dropped to their lowest level so far this year and settled on Friday at the lowest levels since June 2023.
Ben Luckock, Global Head of Oil at Trafigura, expects Brent to drop into the $60s handle, although he warned that traders shouldn’t put all their eggs in the basket of shorts.
The price of Brent is “probably going to go into the $60s some time relatively soon,” Luckock said at the Asia Pacific Petroleum Conference (APPEC) conference in Singapore on Monday.
But, he warned that “It’s dangerous because there’s so many events out there that can ruin your day,” in remarks at a panel at the conference carried by Bloomberg.
“I wouldn’t put all your chips on the table being short,” Luckock said.
The mood in the oil market has been increasingly bearish in recent weeks amid concerns about oil demand in China, which isn’t living up to earlier expectations of leading another year of growth in global consumption.
Another major oil trader, Gunvor, also expects Brent at $70. Gunvor’s co-founder and chairman Torbjorn Tornqvist told the APPEC conference that Brent’s fair value is now $70 a barrel as supply outpaces demand.
The problem with oversupply is not the OPEC+ policy but the fact that the group doesn’t have control over the jump in non-OPEC+ supply, Tornqvist said.
The bearish forecasts from Gunvor and Trafigura came just as Morgan Stanley cut again its forecast of Brent oil price to average $75 a barrel in the last quarter of the year. The outlook downgrade was the second in just two weeks after at the end of August the Wall Street bank cut its Brent price forecast for the fourth quarter to $80 per barrel, down from $85 expected earlier.
Treasury yields trimmed early gains, weighing on the US Dollar.
Market participants await the release of the US Consumer Price Index on Wednesday.
XAU/USD battles to extend gains beyond $2,500 as bulls paused.
Spot Gold trades just around the $2,500 mark, unchanged on Monday and confined to a tight intraday range. The bright metal peaked at $2,505.18 early in the American session, as Treasury yields started the day with a positive footing. The United States (US) 10-year note peaked at 3.76% but then trimmed gains and currently stands at 3.70%.
The US Dollar remained resilient throughout the first half of the day, extending Friday’s NFP-inspired gains. The poor performance of Asian indexes added to USD strength, which receded mid-European session, as local shares managed to post gains, underpinning Wall Street ahead of the opening.
Financial markets are waiting for US inflation data, as the country will release the August Consumer Price Index (CPI) next Wednesday. The index is foreseen up by 2.6% on a yearly basis, easing from the 2.9% posted in July. The core annual reading, however, is expected to remain unchanged at 3.2%.
Following the release of the Nonfarm Payroll (NFP) report, speculative interest lifted bets the Federal Reserve (Fed) may opt for a 50 basis points (bps) rate cut when it meets next week. Cooling inflationary pressures will add to such speculation.
XAU/USD short-term technical outlook
From a technical point of view, the daily chart for XAU/USD shows bulls hold the grip but stay cautious. The pair is currently hovering around a mildly bullish 20 Simple Moving Average (SMA), with buyers quickly adding on dips below the media. At the same time, technical indicators hover around their midlines without clear directional strength. Finally, the longer moving averages maintain modest bullish slopes far below the current level.
The near-term picture is neutral-to-bearish. Converging 20 and 100 SMAs provide resistance around the aforementioned intraday high, while the 200 SMA aims north at around $2,465. The Momentum indicator aims lower at around its midline, skewing the risk to the downside without confirming it. Finally, the Relative Strength Index (RSI) indicator holds directionless at around 50, lacking directional strength.
Just two weeks after lowering its Brent oil price estimate to $80 per barrel for the fourth quarter, Morgan Stanley cut again its forecast, now expecting the international benchmark to average $75 a barrel in the last quarter of the year.
Analysts at Morgan Stanley see rising headwinds on the demand side, which has been their key reason for cutting their Q4 oil price forecast.
“The recent trajectory of oil prices has similarities to other periods with considerable demand weakness,” Morgan Stanley analysts wrote in a Monday note carried by Bloomberg.
The time spreads on the oil’s futures curve have been signaling “recession-like inventory builds,” the analysts noted.
However, they wrote that it was too early to make that part of Morgan Stanley’s base-case scenario.
Monday’s downward revision to oil price forecasts is Morgan Stanley’s second such cut in a little over two weeks.
At the end of August, the Wall Street bank cut its Brent price forecast for the fourth quarter to $80 per barrel, down from $85 expected earlier.
Back then, Morgan Stanley said that the lowered oil price forecast reflected expectations of increased supply from OPEC and non-OPEC producers amid signs of weakening global demand. The bank anticipates that while the crude oil market will remain tight through the third quarter, it will begin to stabilize in the fourth quarter and potentially move into a surplus by 2025.
Early on Monday in Asian trade, Brent Crude prices traded at just below $72 per barrel, after settling on Friday at just above $71—the lowest level since June 2023.
Morgan Stanley isn’t the only major investment bank to have cut its oil price forecasts in recent weeks.
Goldman Sachs has lowered its expected range for Brent oil prices by $5 to $70-$85 per barrel, on the back of weaker Chinese oil demand, high inventories, and rising U.S. shale production.
Citi, for its part, sees $60-per-barrel oil prices next year if OPEC+ fails to implement more production cuts, amid slowing demand and strong supply coming from non-OPEC producers.
Recent U.S. labor market data has fueled speculation about an aggressive rate cut. Private employers added the fewest workers in over three years in August, signaling a sharp slowdown in hiring. This follows a drop in U.S. job openings in July, further reinforcing concerns about the strength of the labor market. ADP’s employment data triggered a notable uptick in gold prices, as market participants viewed the labor market as being in a precarious state.
“The labor market is in a dire state, and there is a lot of concern about it,” noted Phillip Streible, chief market strategist at Blue Line Futures. Additional weekly jobless claims data also failed to improve sentiment, increasing the likelihood of a larger-than-expected rate cut.
Fed’s Rate Cut Expectations Depend on NFP Data
Currently, traders see a 59% chance of a 25-basis-point rate cut at the Fed’s next meeting, with a 41% probability of a more substantial 50-basis-point reduction, according to the CME FedWatch tool. The Fed has signaled that incoming economic data, particularly employment figures, will play a key role in determining the size of the cut.
San Francisco Fed President Mary Daly emphasized that the central bank must take action to protect the labor market, but the extent of the move hinges on Friday’s NFP report. Should unemployment rates remain elevated at 4.3%, gold could push towards record highs as markets price in a larger rate cut.
NFP Report: Scenarios to Watch for Gold Traders
The August NFP report is expected to show a gain of around 160,000 jobs. A result in line with expectations would likely favor a 25-basis-point rate cut, maintaining gold’s recent strength without significant volatility. However, if the jobs number comes in lower, potentially reflecting a more serious economic slowdown, the likelihood of a 50-basis-point cut increases, which would likely boost gold prices further as traders seek safe-haven assets.
Conversely, stronger-than-expected job growth could dampen the prospects of a large cut, leading to potential selling pressure on gold as investors reassess the Fed’s stance.
