On May 20, 2024, the Brent crude oil price stood at 83.7 U.S. dollars per barrel, compared to 79.8 U.S. dollars for WTI oil and 84.51 U.S. dollars for the OPEC basket. Europe’s Brent crude oil, the U.S. WTI crude oil, and OPEC’s basket are three of the most important benchmarks used by traders as reference for oil and gasoline prices. The increase noted in April 2024 reflected uncertainty over growing geopolitical tensions in the Middle East.
Lowest ever oil prices during coronavirus pandemic
In 2020, the coronavirus pandemic resulted in crude oil prices hitting a major slump as oil demand drastically declined following lockdowns and travel restrictions. Initial outlooks and uncertainty surrounding the course of the pandemic brought about a disagreement between two of the largest oil producers, Russia and Saudi Arabia, in early March. Bilateral talks between global oil producers ended in agreement on April 13th, with promises to cut petroleum output and hopes rising that these might help stabilize the oil price in the coming weeks. However, with storage facilities and oil tankers quickly filling up, fears grew over where to store excess oil, leading to benchmark prices seeing record negative prices between April 20 and April 22, 2020.
How crude oil prices are determined
As with most commodities, crude oil prices are impacted by supply and demand, as well as inventories and market sentiment. However, as oil is most often traded in future contracts (whereby a contract is agreed upon, while the product delivery will follow in the next two to three months), market speculation is one of the principal determinants for oil prices. Traders make conclusion on how production output and consumer demand will likely develop over the coming months, leaving room for uncertainty. Spot prices differ from futures in so far as they reflect the current market price of a commodity.
The chance for a continuation of the bear trend is increasing. Recent failed attempts to breakout above the 200-Day MA, the more significant trend indicator, have failed and we’re now seeing increasing signs of weakness. The week ends tomorrow and unless the bulls take back control crude oil is set to end the week with a bearish candlestick pattern.
A bear trend continuation signal will be given on a drop below last week’s low of 76.83. Last month’s low of 76.86 was already busted once earlier this month. A drop below that low will provide a second monthly bearish signal. The next lower target zone includes the 61.8% Fibonacci retracement at 75.49, along with the bottom trend channel line. Further down is the 78.6% retracement at 72.11.
Rallies Will Again Deal with Solid Resistance Zone
On the upside, a rally above today’s high of 79.14 sets up another test of trendlines and moving average as resistance. One thing to consider is that when multiple lines identify a similar price zone, it becomes more significant. For crude oil, that significance may be experienced as strong resistance leading to a bearish continuation, or a key pivot where an upside breakout may trigger strong momentum.
For a look at all of today’s economic events, check out our economic calendar.
The US Dollar benefits from upbeat United States data, risk-off mood.
Hawkish FOMC meeting Minutes suggest rate cuts won’t come until September.
XAU/USD is pressuring a critical Fibonacci support and bears an aim for lower lows.
Spot Gold kept falling on Thursday, with XAU/USD trading as low as $2,340.28 at the beginning of the American session. The bright metal is sharply down for a second consecutive week, with the US Dollar initially taking advantage of hawkish Federal Open Market Committee (FOMC) meeting Minutes. The document, released on Wednesday, showed officials expressed concerns about the lack of progress towards their goal of 2% but still believe inflation would ease. A rate cut, however, seems unlikely before September. The announcement weighed on stock markets, pushing Wall Street into a negative close.
The US Dollar further advanced on Thursday following the release of upbeat United States (US) data. The country reported Initial Jobless Claims for the week ended May 17 declined to 215K from the previous 223K, while better than the 220K expected. Furthermore, S&P Global released the preliminary estimates of the May Purchasing Manager Indexes (PMIs), which showed business activity growth accelerated sharply to its fastest for just over two years in May, according to provisional data. The Composite PMI improved to 54.4 from 51.3 in April, while the Manufacturing PMI recovered to 50.9 after printing 50 in the previous month. Finally, the services index jumped to 54.8, its highest in a year.
Finally, Wall Street opened mixed, with the Dow Jones Industrial Average losing roughly 0.70%, while the S&P500 and the Nasdaq Composite hold into the green.
XAU/USD short-term technical outlook
XAU/USD trades around the 61.8% Fibonacci retracement of the rally between $2,277.20 and the record peak at $2,449.92, at $2,344.70. Technical readings in the daily chart show the momentum remains strong, as indicators extended their sharp slides, with the Momentum holding above its 100 line but the Relative Strength Index (RSI) indicator piercing its midline and supporting another leg south. At the same time, XAU/USD is battling with a now flat 20 Simple Moving Average (SMA), while the 100 and 200 SMAs keep heading north far below the current level.
The risk skews to the downside in the near term. XAU/USD trades below all its moving averages in the 4-hour chart, with the 20 SMA turning firmly south, well above the current level. At the same time, technical indicators maintain their downward slopes at fresh April lows and without signs of bearish exhaustion despite entering oversold readings.
Support levels: 2,340.20 2,323.70 2,307.10
Resistance levels: 2,354.20 2,372.90 2,384.15
XAU/USD Current price: $2,344.77
The US Dollar benefits from upbeat United States data, risk-off mood.
Hawkish FOMC meeting Minutes suggest rate cuts won’t come until September.
XAU/USD is pressuring a critical Fibonacci support and bears an aim for lower lows.
Spot Gold kept falling on Thursday, with XAU/USD trading as low as $2,340.28 at the beginning of the American session. The bright metal is sharply down for a second consecutive week, with the US Dollar initially taking advantage of hawkish Federal Open Market Committee (FOMC) meeting Minutes. The document, released on Wednesday, showed officials expressed concerns about the lack of progress towards their goal of 2% but still believe inflation would ease. A rate cut, however, seems unlikely before September. The announcement weighed on stock markets, pushing Wall Street into a negative close.
The US Dollar further advanced on Thursday following the release of upbeat United States (US) data. The country reported Initial Jobless Claims for the week ended May 17 declined to 215K from the previous 223K, while better than the 220K expected. Furthermore, S&P Global released the preliminary estimates of the May Purchasing Manager Indexes (PMIs), which showed business activity growth accelerated sharply to its fastest for just over two years in May, according to provisional data. The Composite PMI improved to 54.4 from 51.3 in April, while the Manufacturing PMI recovered to 50.9 after printing 50 in the previous month. Finally, the services index jumped to 54.8, its highest in a year.
Finally, Wall Street opened mixed, with the Dow Jones Industrial Average losing roughly 0.70%, while the S&P500 and the Nasdaq Composite hold into the green.
XAU/USD short-term technical outlook
XAU/USD trades around the 61.8% Fibonacci retracement of the rally between $2,277.20 and the record peak at $2,449.92, at $2,344.70. Technical readings in the daily chart show the momentum remains strong, as indicators extended their sharp slides, with the Momentum holding above its 100 line but the Relative Strength Index (RSI) indicator piercing its midline and supporting another leg south. At the same time, XAU/USD is battling with a now flat 20 Simple Moving Average (SMA), while the 100 and 200 SMAs keep heading north far below the current level.
The risk skews to the downside in the near term. XAU/USD trades below all its moving averages in the 4-hour chart, with the 20 SMA turning firmly south, well above the current level. At the same time, technical indicators maintain their downward slopes at fresh April lows and without signs of bearish exhaustion despite entering oversold readings.
I like the idea of buying dips, and I still have some of my ETF position, so I’m happy. I just would rather find more value because I did close out half of my ETF position, at about 240 or 245, and therefore I think this surge higher most certainly will be followed by people trying to support the market.
But you need a pullback at this point to find any value. Yes, short term momentum players may push this market higher. And yes, temperatures in America have been hotter than expected. But really, at the end of the day, natural gas is a completely abundant resource that is not hard to find. I actually live in an area that is flooded with natural gas.
So I know of what I speak, and therefore I never really trust these moves for anything more than a short term trade. Whether or not we can sustain the upward pressure remains to be seen, but right now I would not bet on it. What I am looking for is a pullback to take advantage of, and I’ll add my ETF position because as you know leverage in this market is very dangerous.
For a look at all of today’s economic events, check out our economic calendar.
Following the recent rally, the spotlight is on , and analysts have been busy assessing their forecasts for copper prices, reflecting a complex set of factors from supply constraints and geopolitical factors to evolving demand trends in various sectors.
Copper prices rally
While copper prices slumped on Wednesday, the metal has experienced a significant rally over the past couple of months, with prices hitting record highs on Monday this week.
Copper, which is a vital industrial metal whose price movements have significant implications for global markets and industries, hit an intraday record of $5.1990 a pound or $11,460 a tonne. This year, copper is up 27%.
The rally was fueled in part by traders betting on a soft supply of the metal in the coming months as miners’ production cuts began to take effect.
Copper prices forecast for 2024
Despite the rally, analysts at Citi believe the price of copper is set to consolidate over the next three to six months.
The bank’s forecast for a stabilisation in prices comes with LME prices currently trading close to their zero to three-month point price target of $10,500 a ton after reaching their six to 12-month target of $11k a ton last week.
Citi believes “investors have been right to push copper up from $8-8.5k/t to $10.5k/t over the past 3-4 months.”
However, they explained they think machines are likely a large share of the ~$30bn of copper fund length additions this year.
“In the coming months, some of this length is likely to turn over to consumer hedgers, along with macro and commodity-specific hedge funds, for whom we consider sub-$10k/t as inexpensive,” said Citi.”Indeed, physical indicators (such as visible inventories, spreads and premiums) aren’t going to look great for some time as China semi-fabricators de-stock refined metal and as global scrap dealers de-stock scrap.”
The current price levels are seen as sufficient to avoid huge deficits in the copper market this year as the scrap market responds.
Meanwhile, JPMorgan analysts believe pricing expectations are overshooting the fundamentals while copper stocks are currently trading at fair value.
“Copper has been on a tear thus far this year, rising 27% YTD amid what we view as relatively overdone refined supply-side concerns,” said JPMorgan. “This has translated into strong re-rating for copper-levered stocks FCX (+20% YTD) and TECK (+24%) with near-term investor sentiment now seemingly more bearish relative to the start of the year.”
“Pricing sentiment appears to have overshot underlying fundamentals, which are more sound than recent pricing momentum infers, largely driven by resilient China refined supply and seemingly elastic demand,” they add.
The bank also notes that the latest copper forward curve now exceeds both their base case and JPM’s Commodities team’s copper price forecast through the remainder of the year and into next year, suggesting further upside potential should bullish expectations materialize.
The minutes from the Federal Open Market Committee (FOMC) meeting on April 30-May 1 revealed heightened concerns about persistent inflation. Policymakers expressed uncertainty about when to start reducing interest rates, citing recent data showing inflation running well above the Fed’s 2% target. The minutes noted that while inflation had eased over the past year, there had been no further progress in recent months.
Potential for Further Tightening
The FOMC’s minutes highlighted the possibility of additional tightening if inflation risks escalate. Some officials indicated a readiness to increase rates should inflationary pressures intensify. Despite this, key figures like Fed Chair Jerome Powell and Governor Christopher Waller suggested that further rate hikes are unlikely in the near term.
Current Economic Indicators
The committee unanimously voted to maintain the benchmark short-term borrowing rate at 5.25%-5.5%, the highest level since July 2023. Recent data shows incremental progress on inflation, with the April consumer price index at 3.4% annually, down slightly from March. Core CPI, excluding food and energy, was at 3.6%, the lowest since April 2021. Despite these improvements, consumer sentiment surveys, such as those from the University of Michigan and the New York Fed, reflect growing concern over economic conditions.
Inflation Risks and Consumer Impact
Fed officials acknowledged several upside risks to inflation, particularly from geopolitical factors. They also noted the financial strain on lower-income households, who are increasingly relying on credit cards and buy-now-pay-later services, leading to higher delinquency rates. The minutes underscored the importance of maintaining economic growth while managing inflation expectations.
Market Expectations for Rate Cuts
Public statements from Fed officials since the meeting have been cautious. Governor Waller emphasized the need for consistent positive data before considering rate cuts. Chair Powell echoed the sentiment, stressing patience in letting restrictive policies take effect. Market expectations for rate cuts have adjusted, with futures pricing indicating a 60% chance of a rate cut in September, though the likelihood of a second cut in December has decreased to just over 50%.
Short-Term Market Forecast
Given the Fed’s stance on maintaining higher interest rates and ongoing inflation concerns, silver prices are likely to face continued downward pressure in the short term. Traders should monitor upcoming economic data and Fed communications for further insights into rate policy and its impact on silver markets.
The Federal Reserve’s minutes revealed that officials are not in a hurry to reduce rates. Several members even questioned if the current high rates were sufficient to curb inflation. The minutes noted that net long positions held by investors in gold were near their highest level in over three years, reflecting a lack of confidence that the Fed will cut rates more than once in 2024.
Disinflation Expectations
Despite acknowledging some uncertainty, Fed officials maintained their expectation that inflation would eventually return to the 2% target. They emphasized that disinflation could take longer than previously anticipated. The policy response, for now, involves keeping the Fed’s benchmark rate within the 5.25%-5.50% range, though officials expressed a willingness to tighten further if inflation risks materialize.
Market Reactions
Following the minutes’ release, U.S. Treasury yields edged up, and traders reduced their bets on significant Fed rate cuts this year. The minutes indicated an emerging debate on the actual tightness of the current monetary policy, a crucial factor in determining how quickly inflation can be reduced to the 2% target. Some Fed officials have since downplayed the likelihood of imminent rate cuts, projecting a stable rate environment until at least September.
Physical Demand for Gold
Physical demand for gold has remained strong since 2021. However, high prices may deter discretionary buying. Gold prices have increased by 14.5% this year, driven by a rally from March to May. In India, the world’s second-largest gold consumer, high prices could lead to a nearly 20% decline in imports in 2024, as consumers opt to exchange old jewelry instead of purchasing new items.
Market Forecast: Bearish
Given the Fed’s stance on maintaining higher interest rates for a prolonged period and the resulting profit-taking in the gold market, the short-term outlook for gold prices appears bearish. Traders should prepare for potential further declines as the market adjusts to the Fed’s policy signals and the ongoing uncertainty regarding inflation control.
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A new all-time high for London Metal Exchange (LME) copper was well within reach on Friday, May 17, which confirms our overall bullish bias on the red metal. While we maintain this bullish view, we’re also mindful that the momentum is getting a tad frothy and this is a gentle reminder that nothing will move in a straight vertical line without some technical consolidation along the way.
To use a running analogy, when training for a marathon, stamina management and knowing when to let your body regulate are the key differences between an individual completing the marathon or struggling to reach the finish line.
As outlined in the LME copper weekly chart (see below), we are focusing on the price structure last seen in November 2010. This was when the copper price moved above the 2008 all-time high and then produced a sharp weekly pullback before resuming its upward tack to reach much higher prices.
We now think the copper space is overdue such a scenario, where profit taking and a mini shake out of weak longs will emerge. This could potentially last for the next two to four trading weeks and the dip at the end of the correction should attract dip-buying to enter the copper space again.
Bullish monthly outlook for LME copper
The bulls are in charge in LME copper and that supports the mainstream theory that a new all-time high is more a matter if when and not if.
If this bullish play continues – and assuming that copper’s price action resembles that of November 2010 – we can deduce that LME copper may not produce a sizeable pullback at all in May. Rather, it could a sharp, but very mild, correction as discussed above.
Instead, there is likely to be a run toward the 2022 all-time high first, with perhaps just the chance of a shallow pullback in May, but with a firm monthly close above $10,000 per tonne.
Going into June, the bullish momentum will continue from the latter half of the trading month, taking copper to another all-time high by August and/or tagging the upper blue channel at around $12,000 per tonne.
Sustained bullish momentum
We now expect the bullish momentum in copper prices to be sustained over the coming months and view any technical pullback in May to June to be a temporary, but necessary, move for the bulls to regroup. We envisage that while the LME copper price will trade toward the record high seen in 2022, it will subsequently produce a technical pullback that could see the price of the red metal dip below $10,000 per tonne again. But it will be vital that the LME copper price does not produce a bearish monthly close of below $9,500 per tonne because that would negate the bullish narrative.
CME speculators are aggressively long
According to the latest data from the US Commodity Futures Trading Commission (CFTC), non-commercial traders raised their net long positions in CME copper by 4,720 contracts in the week ending May 7 to 62,176 contracts, representing 16% of the open interest. This was the fifth consecutive week of net buying.
The speculative community is not at +74% of its historical max net long position, compared to -4% of its historical max net short position at the start of the year, showing the clear reversal in the market sentiment/positioning.
Speculators are usually trend followers, suggesting that they will continue to add to their long positions as prices continue to rise. Conversely, if prices start to weaken, speculators would exit their positions, potentially intensifying the sell-off. We remain of the view that this scenario is plausible in May-June, especially after the remarkable rally in April.
LME funds at fresh all-time high
LME fund managers were bullish on copper in the week to May 10 with the fresh buying of 4,207 lots. That was the sixth consecutive week of buying and brought LME copper’s net long fund position (NLFP) to a new all-time high of 63,589 lots. The bullish sentiment among funds corroborates this bullish price action and LME copper produced a positive weekly close above the key psychological price level of $10,000 per tonne in the week to May 17.
We remain firmly bullish on the red metal, but we are also mindful that the current rally is a tad overbought. We therefore envisage that the copper space could well do with a short-term mini shake out – a sharp correction for the next two to four trading weeks – and the dips buying will then resume again. We expect any pullback to be short-lived and that a resumption to the upside will be seen in the latter half of June, with a new all-time high of around $12,000 per tonne possibly logged by August this year.
All trades or trading strategies mentioned in the report are hypothetical and for illustration only and do not constitute trading recommendations.
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During the Asian session, Gold (XAU/USD) is trading at $2,365.98, down 0.60%. The 4-hour chart shows a pivot point at $2,373.12. Immediate resistance levels are $2,392.88, $2,404.97, and $2,426.92. Key support levels are $2,351.98, $2,335.24, and $2,318.77.
Technical indicators reveal that the candles have crossed below both the 50 EMA at $2,399.47 and the 200 EMA at $2,367.33, forming a bearish engulfing pattern, suggesting a bearish trend.
According to NatGasWeather, the southern third of the U.S. will remain very warm to hot over the next five days, with temperatures in the upper 80s and 90s, and even reaching 100s locally. The East will also experience warmth today, with highs in the mid-80s to lower 90s, contributing to strong national demand. However, the 6-15 day forecast period indicates cooler weather systems impacting much of the eastern U.S., including Texas, which could moderate demand.
Bankruptcy Filing and Project Delays
The lead contractor for the Golden Pass LNG project, Zachry Holdings, filed for Chapter 11 bankruptcy protection on Tuesday. This $10 billion project, developed for QatarEnergy and Exxon Mobil, has faced cost challenges and disputes over funding. Exxon Mobil, holding a 30% stake in the project, stated it would review construction timing and provide updates in the future. The project is expected to significantly expand U.S. LNG exports once operational, but the bankruptcy filing has introduced uncertainty regarding its completion timeline.
Hurricane Season Risks
The forecast for a particularly intense Atlantic hurricane season this year poses additional risks to the U.S. oil and natural gas industry. Meteorologists expect 20-25 named storms, with the possibility of over 30. These storms can disrupt crude oil production and refinery operations, especially in the Gulf of Mexico and along the Texas and Louisiana Gulf Coasts, which house almost half of U.S. refining capacity.
Impact on Natural Gas Markets
While hurricanes could reduce natural gas production in the Gulf of Mexico, the impact on the overall U.S. supply is expected to be minimal due to the region’s declining production share. However, LNG export operations could face interruptions, as seen with Hurricane Laura in 2020. The United States has substantial LNG export capacity located on the Gulf Coast, making it vulnerable to weather-related disruptions.
Short-Term Market Forecast
Given the current selling pressure, cooler weather forecasts, and potential delays in LNG project completions, natural gas prices are expected to remain under pressure in the short term. The upcoming hurricane season further adds to the bearish outlook, with potential production and export disruptions likely to weigh on market sentiment. Traders should remain cautious and monitor weather developments and project updates closely.
