Weekly Review: All that happened with commodities and energy last week
The Brent fell 1.1% last week after rallying almost 12% over two previous weeks. January-to-date, the global crude benchmark rose less than 1%. Oil loadings from Russia’s Baltic ports are the main reason for the declines seen during the week.
Oil Price Outlook: Technical chartist Sunil Kumar Dixit, who is also the Chief Technical Strategist at SKCharting.com, explained that if WTI does not pop on the theatre that OPEC+ pulls at its Feb. 1 meeting, then the U.S. crude benchmark could plummet to its recent low under $76 a barrel. He said:
- “In case of a strong break below $79.10 and $78.60, the next drop for WTI would be $77.76 and this may be followed by even lower levels at $76.78 and $75.65.”
Despite multiple attempts to make a sustainable break above $82.60, Dixit noted that WTI settled the week in a relatively bearish mood at $79.68. He added, “Momentum appears trapped within a $4 range of $82.60-$78.60, which needs to break for further direction.”
Dixit said a decisive breakout above $82.60 will open the way for WTI’s next leg higher to $83.88. That could be followed by $84.70. which is a 61.8% Fibonacci retracement from the drop of $93.76 to $70.06
Natural Gas: Gas futures have lost 57% of their value over the past six weeks after an unusually warm start to 2022/23 winters led to a collapse in demand for heating oil. Before this week’s plunge to $2 levels, gas hit 14-year highs of $10 per mmBtu in August and even traded as high as $7 in December.
Natural Gas Price Outlook: Dixit noted that untiring selloff efforts continued in natural gas for a seventh week in a row, pushing prices down to $2.747 per mmBtu, with hardly any signs of exhaustion yet to the plunge. He explained:
- “The stochastics and RSI on the weekly chart have reached oversold conditions that call for a rebound either from current lows or a bit lower, at $2.60 and $2.35.”
On the flip side, oversold conditions call for a short-term rebound towards the resistance zone of $3.00 and $3.30, followed by peaks to the $3.50 and $3.70 supply zone, he added.
Gold: Gold on New York’s Comex did a final trade of $1,928 on Friday after settling the session at $1929.40, down about 60 cents. The spot price of gold, more closely followed than futures by some traders, settled at $1,928.15, down approximately 1%, on the day. Spot gold peaked at $1,949.29 on Thursday before an intraday high of $1,935.40 on Friday.
The $1,950 resistance is a key test for gold’s ability to scale towards record highs of above $2,000 an ounce, which it got to in April last year, almost reprising its all-time peak from August 2020. Since this year began, both futures and spot gold have gained more than 5% each.
The main reason for the price retreat from a nine-month high is a result of data that showed the U.S. economy grew more than expected in the fourth quarter, even as underlying trends signalled more weakness. But the reading still triggered a recovery in risk appetite and helped the dollar recover from a near eight-month low against a basket of currencies.
Focus is now on the core Personal Consumption Expenditures price index reading for December, which is expected to have retreated further from the prior month. But the reading is still expected to be well above the Fed’s annual target of 2%.
Gold Price Outlook: Spot gold’s failure to settle the week above $1,932, with its drop to below $1,928, raises the possibility of further descent, said Dixit. He stated, “We could revisit gold’s recent low of $1,916 and extend the decline towards $1,912, followed by $1,900.”
If selling intensifies below $1,900, a further drop to $1,880 and $1,870 can be witnessed, Dixit said. But if spot gold’s bullish trend stays intact, buyers were likely to resurface on the support zone in anticipation of an upshot targeting $1,965 and $1,972, he said.