Commodities week ahead: WTI, Gold, Nat gas key levels to watch
11:22, 13 February 2023
11:22, 13 February 2023
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WTI: a price war between Russia and the West continues as Russian Deputy Prime Minister Alexander Novak said on Friday that they would be cutting 500,000 barrels per day in March following the introduction of Western price caps. Since the price caps were proposed earlier last year, markets had already prepared themselves for this as Russia had been touting it as a possibility, but WTI still managed to carve out a little positive real ion and rose 2.75% on the day. We also saw OPEC Secretary-General Haitham Al Ghais say at a conference over the weekend that the cartel expects global oil demand to exceed pre-pandemic levels in 2023. The lower supply and higher demand scenario should keep a floor under oil prices and therefore it can be expected that WTI should break away from its year-long descending trend.
With regards to the chart, the “wave pattern” continues to unfold although it is losing some strength as they are getting shorter. There seems to be a fair amount of resistance up ahead which is likely going to be fronted by the 100-day SMA (80.785). The US CPI on Tuesday is going to be the key event this week and given that a higher-than-expected print would allow the Fed to hike more aggressively, there is a risk of that being underpriced at current levels, meaning the USD could see a rally, taking down WTI with it. If so, look for support around the $75 mark, as a drop below this level could see a further retirement towards the year's low at $72.45.
GOLD: rising short-term yields have put pressure on gold prices taking XAU/USD to a 5-week low. The strong selloff seems to have been halted for now but the attempts to break higher are faltering as the recent rally was overextended, which suggests there is still further pullback to go. The US CPI may be the catalyst for this as a stronger dollar would likely send XAU/USD to yearly lows below $1,820 per ounce. Rising geopolitical tensions between the US and China should favour the safe haven appeal of gold but its upside potential seems pretty capped right now, so a close above $1,880 would be needed to confirm further buying support.
NATURAL GAS: the downside momentum has started to slow as natural gas reaches a key area of support (2.50 - 2.28) which held the lows through an 8-month stretch between August 2020 and April 2021. Last week was the first one to finish in positive territory after 8 consecutive weeks in the red, which has prompted the weekly RSI to flatten out below the 30 line in an attempt to reverse some of the selling pressure. Looking back at the last time price was around these levels (March 2021) the move away from the key area of support found resistance around the $3 mark so we may see that again if the short-term momentum reverses to the upside.