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Oil Benefits From Expected Delay of Iran Crude and Good Chinese Data

Oil Benefits From Expected Delay of Iran Crude and Good Chinese Data

Nathalie Huynh, Contributor

Talking Points:

  • Chinese resilient economic growth boosts commodities
  • Oil gathers momentum on uncertain Iranian supplies
  • Gold prices in range ahead of Yellen’s testimony to Congress
  • Copper rises on positive Chinese data

The much awaited China’s data today beat forecasts on all fronts and helped to lift commodity prices. From 2nd quarter GDP to Retail sales to Industrial Production, actual data all indicated that economic growth has responded positively to the government’s stimulus program. Chinese GDP rose 7 percent in the second quarter from a year earlier, in line with the 7 percent annual expansion target and bolstered outlook for world economy.

WTI and Brent crude oil ended higher in New York session and scored further gains in Asia today as market expected a delay in Iranian crude supplies after a nuclear accord was reached. While this deal would allow for a return of the world’s fourth largest producer to crude oil market, its reserves may take years to reach full potential. According to Richard Nephew, a Program Director at the U.S. Center on Global Energy Policy, new oil from Iran was only expected to enter the market in 2016, at a rate of 300,000-500,000 barrels a day. This was less optimistic than the previous estimates provided by Iran that it could ramp up production to an extra 1 million barrel a day within six months of program implementation.

WTI oil has added 0.53 percent and Brent has gained 0.40 so far in Asia. Despite of this brief rise, oil prices continue to be depressed by a divergence of supply and demand as a global supply glut contradicts with lower demand due to uncertain macroeconomics. Technical chart shows that WTI is lingering below a resistance level at 53.51 with slim chance for a break.

Gold sets to fall for a third day as US dollar pares losses and speculations build ahead of Federal Reserve Chair Janet Yellen's semi-annual testimony to Congress on Wednesday and Thursday. Last Friday she reiterated that interest rate would be raised later this year, however emphasised that “unanticipated developments [in the economy and inflation] could delay or accelerate this first step”, according to CNBC news. Soft US retail sales data yesterday and the uncertain situation in Europe added to dovish sentiment. Gold will likely stay in range while market is in wait-and-see mode for what the Fed says later in the week.

Industrial metals were down earlier in Asian session before better than estimated Chinese data helped to lift prices. Copper has gained 0.3 percent so far and still looks to further upside. Overall, the metal retains its sideways movement below a resistance level of 20-day moving average at 2.578 today.

GOLD TECHNICAL ANALYSIS – Gold remains in a range above two support levels at 1142.5 and 1130.1. Prices are on a third day of loss hence both the bulls and bears may keep watch on any tests of support to adjust their positions. With fundamental factors biased to downside, a break of support would likely lead to considerable pressure and sharp falls in prices. Whereas failure to break support would see prices stuck in a tight range.

Daily Chart - Created Using FXCM Marketscope

COPPER TECHNICAL ANALYSIS – Copper is still flat today although positive Chinese data brought a brief rise by noon time in Asia. A resistance level at 20-day moving average remains unchallenged and provides a top level for the bears to place their trades. Momentum signals still point to lower extensions.

Daily Chart - Created Using FXCM Marketscope

CRUDE OIL TECHNICAL ANALYSIS – WTI oil touched up to the 53.51 resistance level in Asian morning and is lingering right below it. Momentum signals display a downside bias hence a break of resistance is not expected in today’s session. The oil bears may wait for repeated failures to break resistance before considering short positions.

Daily Chart - Created Using FXCM Marketscope

--- Written by Nathalie Huynh, Currency Strategist for DailyFX.com

Contact and follow Nathalie on Twitter: @nathuynh

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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