Crude Oil Prices Seesaw on Iran Sanctions, Rising Swing Output

2017-02-06 10:30:00

Talking Points:

Crude oil prices seesaw on Iran sanctions, rising swing output
Gold prices rise as US jobs data cools Fed rate hike speculation
Light data docket puts Washington, DC firmly in the spotlight

Crude oil prices were in for a wild ride in Friday’s session. The WTI benchmark soared after the US imposed a round of new sanctions on Iran having taken issue with the latter country’s ballistic missile tests. The move failed to follow through however and prices swiftly retreated ahead of the weekly Baker Hughes rig count report crossed the wires.

Investors’ caution was perhaps vindicated: the figures showed the number of active oil extraction points rose to the highest since October 2015. This seems to highlight the limited scope for OPEC’s coordinated output cut scheme – a major catalyst for recent price gains – to remain supportive as swing supply from North America comes on steam.

The road ahead looks no less treacherous. A thin economic calendar leaves news-flow out of Washington, DC as the main attraction. That is worrisome for traders considering the frenetic pace at which the newly minted Trump administration delivers policy surprises even as the details of its lofty economic plan remain murky. A wider rift with a defiant Iran may turn out to be just one among many reasons for erratic volatility.

Meanwhile, gold prices reflected a US jobs report that seemingly served as perfect illustration of Janet Yellen’s argument for caution in raising interest rates too quickly. Payrolls rose more than expected and the jobless rate posted an apparently benign gain as participation broadened while the pace of wage inflation slowed. When the Fed Chair talks of more slack in the labor market, this look like it.

The markets responded accordingly, flattening the 2017 rate hike path implied in Fed Funds futures. Not surprisingly, the US Dollar sank with Treasury bond yields while gold marched higher alongside stock prices. Here too however, the way forward appears to depend on the next big headline to come out of the White House. After all, the Fed seems as aware as ever that its next move may indirectly be decided there.

How are DailyFX gold and crude oil price forecasts doing so far in the first quarter? Find out here !

GOLD TECHNICAL ANALYSIS – Gold prices narrowly overcome January’s top, hinting at further gains ahead. A daily close above the 50% Fibonacci expansion at 1229.40 opens the door for a test of the 61.8% level at 1240.88. Alternatively, a reversal back below the 38.2% Fib at 1217.91 exposes the 23.6% expansion at 1203.71 anew.

CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices continue to tread water in a familiar range. A daily close above resistance at 53.86 opens the door for a test of the 55.21-65 area (January 3 high, 38.2% Fib expansion). Alternatively, a reversal below support at 52.44 targets a rising trend line capping losses since early December, now at 51.57.