WCU: Strong week for oil but challenges remain

WCU: Strong week for oil but challenges remain

Ole Hansen, Head of Commodity Strategy at Saxo Bank

· Crude oil might finally have bottomed, but risks running ahead of fundamentals

· Pushed by the ECB decision, gold increased further, reaching a one-year high

After three weeks of sideways trading the Bloomberg Commodity index, which reflects the price development of many key commodities, broke higher and reached three months high. The charge was led by the energy sector. Gasoline surged and crude oil showed the fourth consecutive weekly gain. After heading for the abyss in mid-January, crude oil has recovered, leading many, including the International Energy Agency, to believe that a low has been established.

Rising US gasoline demand and weaker production combined with supply disruptions within Opec have more than off-set growing stockpiles and worries that the March 20 meeting between Opec and Russia may disappoint.

Gold reached a new one-year high following another dose of stimulus from the ECB, which against expectations sent the EUR higher at the expense of the USD. Hedge funds called a halt on buying after accumulating gold for eight consecutive weeks. The buying frenzy from investors using exchange-traded products however continued with many anticipating that further gains awaits just around the corner.

Brent crude oil reached a high close to $41.50/barrel and has now retraced 50% of the sell-off since last October. The sideways trading this past week indicates that an area of resistance has been reached. A rally well into the 40's may prove to be counterproductive as it could attract increased production at a time where the global supply glut has only just begun to show signs of easing.

Once again the risk is growing that the market has run ahead of fundamentals thereby increasing the risk of a setback.

The chart below shows that a battle is currently being fought around $40.70. This level represents a 50% retracement of the sell-off from last September until January. Above $40 the market is increasingly at risk of running ahead of what is being supported by fundamentals.

In the short-term momentum may carry Brent crude higher towards a maximum of $44 before once again running into renewed selling. A break below $39 would signal a renewed weakness towards $36 or potentially as low as $34.25.

Gold remains well supported, not least by investors using exchange traded products. During the week it corrected lower but found support at $1237 after retracing 50% of the latest rally.

However no signs of panic selling were detected. This confirms our belief that despite some headwind being created by rising stocks and stabilizing commodities the psychology in the market has changed.

A major portion of the 275 tons investors have bought since beginning of the year are likely now to be in the hands of longer term investors returning to gold amid low or even negative deposit rates.

The ECB meeting on Thursday resulted in another dose of rate cuts and asset purchase. This helped gold to recover, not least considering the gold friendly and surprise weakening of the USD. At the end of another busy week, gold retraced some of its gains as both the USD and stocks recovered.

We continue to see gold consolidating in a wide range with resistance at $1310 likely to attract some long overdue profit taking while it will take a break below $1190 before tactical traders like hedge funds would begin to consider reversing back out of long positions.

About Saxo Bank

The Saxo Bank Group (Saxo) is an online multi-asset trading and investment specialist, offering a complete set of trading and investment technologies, tools and strategies. A fully licensed and regulated bank, Saxo enables private and institutional clients to easily trade multiple assets from a single margin account on multiple devices seamlessly. Saxo's award winning trading technology platforms are available in more than 20 languages and form the technology backbone of more than 100 financial institutions worldwide. Saxo also offers traditional banking services through Saxo Privatbank in select markets. Founded in 1992 and headquartered in Copenhagen, Saxo employs 1500 people in 25 offices across the five continents.

Israel reports 4,550 new COVID-19 cases, 593,578 in total
Israel reports 4,550 new COVID-19 cases, 593,578 in total
Tesla Israel headquarters nears completion
Tesla Israel headquarters nears completion
Israel registers 9,089 new COVID-19 cases, 574,718 in total
Israel registers 9,089 new COVID-19 cases, 574,718 in total
Loading Bars
Latest
Over 2 mln coronavirus cases registered in Colombia
Israel reports 4,550 new COVID-19 cases, 593,578 in total
Iran's Marun Oil & Gas Production Company manufactures certain equipment
Iran to begin COVID-19 vaccinations in coming weeks: President Rouhani
France registers 23,924 new COVID-19 cases, 230 deaths in one day
Turkmenenergo to sign new contracts with foreign companies
7.0-magnitude quake hits South Shetland Islands: CENC
Turkey reports 5,856 new COVID-19 cases, 2,424,328 in total
After first phone call, UK PM Johnson looks forward to working with Biden
UK records another 33,552 coronavirus cases, 1,348 deaths
WHO reports over 600,000 new daily cases of COVID-19
Azerbaijani, Turkish FMs discuss pirate attack on ship
Top Spanish general resigns over allegations of vaccination queue-jumping
Pirates hijack Turkish ship off coast of Guinea, one person killed
BMB Trade Group and Uzbek Saffron Research Center discuss saffron cultivation and processing
Trend TV shares video report from plundered during Armenian occupation Azerbaijani Zangilan
Belarus, Kazakhstan seek closer cooperation in exchange trade
Management of Azerbaijan's State Oil Company being improved - Decree
New staff of Azerbaijani SOCAR's Supervisory Board approved
Georgia's external merchandise trade down 14.8% in 2020
Turkey halts flights from Brazil due to new COVID-19 variant
Gas pressure in Iran's South Pars gas field projected to decrease
Iran's gas processing potential to increase
Portugal holds presidential election as COVID-19 cases spiral
Italy reports 488 coronavirus deaths and 13,331 new cases
Italy to rethink vaccine roll out if supply problems persist
US broadcaster, journalist Larry King dies aged 87
Russia signs deal with Turkey on vaccine production
Azerbaijani MoF issues footage from Kalbajar district's Gamishli village (PHOTO/VIDEO)
Manat exchange rate against dollar to remain unchanged - Standard & Poor's
Bahar Azadi gold coin price again falling in Iran
Azerbaijan considering issues of regional schools damaged during Karabakh War
Iranian Energy Exchange announces products to be on sale on January 24
State subsidy to increase from 10 to 15 GEL per 50 kg of wheat flour in Georgia
Goods transit via Iran's Bileh Savar on rise
Tax authorities of Kyrgyzstan, Russia discuss launch of joint project
Japan's COVID-19 death toll exceeds 5,000 as total cases surpass 360,000
Indian gov't confirms outbreak of bird flu
Azerbaijani president expresses condolences to Ukranian counterpart
Bulgaria to ease some COVID-19 rules, restaurants closed for now
COVID-19 vaccine delays may slow wider Irish roll-out, says PM
Azerbaijan confirms 705 more COVID-19 recoveries
WHO office in Azerbaijan discusses project on preventing deaths from COVID-19 pandemic
Uzbek-Korean Uz-Kor Gas Chemical to buy spare parts for water purifier via tender
Georgia increases import of vehicles from Turkey
Geostat reveals volume of ferroalloys exported from Georgia to Turkey
Iran oil export never reached zero - Iran's Oil Minister
Azerbaijani expert talks impact of recycling old cars on traffic jams
Weekly review of highlights in Azerbaijani ICT sector
Uzbekistan’s Uzpromstroybank reveals plans for strategic dev’t in 2021
WHO chief thanks India, PM Modi for 'support to global Covid-19 response'
Yukselish competition organizes webinar presented by Azerbaijani president's assistant (PHOTO)
Iran reveals COVID-19 data for January 23
Azerbaijan shares footage from Ashaghy Maralyan village of Jabrayil district (PHOTO/VIDEO)
Turkmenistan taking measures to further increase volume of cotton production
Iran to increase Shiraz municipality budget
Azerbaijani oil prices fall
Georgia sees decrease in COVID-19 cases
Russia reports 20,921 coronavirus cases over day, record low since November 11
Iran-Iraq-Syria transit route would improve economy - Iran's Minister of Road
Azerbaijan and Turkey ink MoU to support SMEs (PHOTO)
Karabakh's geography allows developing various tourism products - Azerbaijan Tourism Board
Standard & Poor's upgrades Azerbaijan's credit rating outlook
Georgian import of medical products from Turkey down
Uzbekistan reveals COVID-19 data for January 23
Brazil President Bolsonaro thanks PM Modi for 'sanjeevni booti' against Covid with Hanuman pic
India's COVID-19 vaccine diplomacy shines in South Asia and beyond
Cooperation on North-South Corridor to be researched during Iran’s FMA visit to Azerbaijan
First Batch of COVID-19 Vaccines Arrive in Myanmar from India
Iranian currency rates for January 23
Joint dev't of Dostlug field to be commercially, technically attractive - Wood Mackenzie
Socio-economic situation in Armenia deteriorating - Azerbaijani MP
AstraZeneca to supply 31 million COVID-19 shots to EU in first quarter, a 60% cut
Iran and Cuba to increase production capacity of COVID-19 vaccine
Iran and Russia to increase transportation ties
One Year to Special Olympics World Winter Games Kazan 2022
Azerbaijan producing lubricants based on new components
Azerbaijan to soon start issuing lump-sum subsidies to orchard farmers
Cancelling SMS permits due to eased quarantine raises passenger traffic in Baku
Turkey halts flights from Brazil due to new COVID-19 variant
COVAX to purchase 40 mln doses of Pfizer-BioNTech vaccine - WHO
Kazakhstan welcomes entry into force of Treaty on Prohibition of Nuclear Weapons
Fitch downgrades three Georgian Banks' support ratings
Tax authorities of Kyrgyzstan, Russia discuss launch of joint project
Chinese Mission to EU condemns European Parliament for interfering in Hong Kong affairs
Dev't of "green" energy potential in Azerbaijan’s Karabakh region to attract investments
Denmark halts UAE flights for five days over COVID-19
UK business activity suffers steep slump in January amid fresh lockdown
Kazakhstan boosts exports volume to Canada amid COVID-19
Kenya Airways suspends flights to France, Netherlands due to COVID-19
Italy tells TikTok to block users after death of young girl
UK records another 40,261 coronavirus cases, 1,401 deaths
Canada's Trudeau presses Pfizer CEO on vaccine shortage, hints at travel crackdown
Swiss court finds Israeli businessman Beny Steinmetz guilty of corruption
Georgian ski resorts remain closed
Kazakhstan increases volume of petroleum oil exported to Germany
Four men jailed for manslaughter of 39 Vietnamese migrants in UK
Reports that Azerbaijani Minister of Sports fell into coma - not true
Turkey registers more than 5 967 new coronavirus cases
Iran has increased oil export - Minister
All news