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Oil Price Routs before OPEC Meeting; China Copper Cutbacks Disappoint

Oil Price Routs before OPEC Meeting; China Copper Cutbacks Disappoint

Nathalie Huynh,

Talking Points:

  • Oil rout continues as OPEC highlights demand doubts ahead of semi-annual meeting
  • Copper price displays disappointment at limited output cuts by China’s top 9 smelters
  • Gold lays low after a fresh 6-year low, in an eventful week with ECB, NFP

An oil rout and US dollar rally on Friday weighed heavily on commodities. WTI oil price has lost nearly 3.5 percent since the New York open on Friday, and currently hovers above the 41.67 support - daily low of November 28.

Oil fundamentals remain gloomy as OPEC officials reportedly rejected the group’s own research that oil glut may ease in 2016, at a 2-day gathering before its semi-annual policy meeting. Oil ministers from OPEC member countries will meet on December 4 in Vienna.

At the meeting one year ago when WTI oil was around $70 a barrel, Saudi Arabia led OPEC to retain low oil price to defend market share. Now the group is in dilemma as the low $40 prices have cut heavily into GDP of less wealthy countries, even Saudi.

Weak demand outlook during off-season period depressed metals prices, after last week’s surge on potential output cuts and investigation into short salesin China. Copper price on COMEX lingers just above the 2.0395 support, while price on Shanghai Future Exchange dropped 2.1 percent. Other metals like iron ore also recorded a sharp drop at 3.6 percent.

The highly awaited 2016 cutbacks ofChina Smelters Purchase Team (CSPT) proved limited as they only agreed to a 5% reduction at a meeting in Shanghai on Saturday morning.

Gold price descended to a new 6-year low at 1052.83 ahead of an eventful week with the European Central Bank’s policy meeting on December 3, U.S. Non-farm Payrolls on December 5 (Asia), and a few Fedspeak including Chair Yellen during the week.

Bullion will likely stay low in the face of building expectation coming up to NFP, and an ensuing rebound in US dollar. A firm support is 50-day moving average at 1001.5.

GOLD TECHNICAL ANALYSIS – Gold price slid to a new 6-year low at 1052.83 in the last session and this level was tested today. A downside bias is inherent in momentum signals hence lower moves are not ruled out yet. On the upside, 20-day moving average comes in as medium-term resistance level at 1081.8, followed by a support-turn-resistance at 1098.8.

Oil Price Routs before OPEC Meeting; China Copper Cutbacks Disappoint

Daily chart - Created Using FXCM Marketscope

COPPER TECHNICAL ANALYSIS – Copper price hovers above Friday’s low and intraday support at 2.0395. Downward momentum keeps price in check. Volatility seems to wane after a slump from 2.08 down to 2.03 region on Friday. This indicates muted price action to come, and that support level will likely hold.

Oil Price Routs before OPEC Meeting; China Copper Cutbacks Disappoint

15-minuteChart - Created Using FXCM Marketscope

CRUDE OIL TECHNICAL ANALYSIS WTI oil price threatens to break out of a range established after last week’s oil rally. Intraday price is parking on the lower bound and support level at 41.72, with only upward momentum to hold it back from further declines. Range traders could follow developments from here to pre-empt a rebound, or buy the dip if prices descend to recent daily lows around 41.21.

Oil Price Routs before OPEC Meeting; China Copper Cutbacks Disappoint

15-minute 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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