Talking Points:

  • Crude oil prices fall further as supply cuts struggles to trim supply glut
  • US rig count data, OPEC committee meeting may mean more trouble
  • Gold prices may find near-term support in French election uncertainty

Commodities made little headway over the past trading day. Crude oil prices continued to fall but momentum noticeably slowed from the previous day’s breakneck selloff. Whispers of preliminary agreement on extending the OPEC-led supply cut deal failed to impress after Saudi Arabia Energy Minister Khalid Al-Falih said the scheme failed to reach its inventory reduction goal, at least so far.

From here, a meeting of the OPEC technical committee charged with monitoring the production cut program and weekly Baker Hughes US rig count data are in focus. Taken together, they may help establish if the cartel appears to have the wherewithal to boost prices or if growing swing supply will full offset its efforts. Yesterday’s price action seems to suggest investors are increasingly partial to the latter view.

Gold prices marked time even as improved risk appetite sent Treasury bond yields higher, bolstering the US Dollar along the way, while the 2017 Fed tightening outlook steepened for a second day. Indeed, the year-end rate implied in Fed Funds futures rose by the most in a month. A terrorist attack in Paris may have been supportive amid worries about its impact on the upcoming French presidential election.

The first round of voting is set for this weekend and the four leading candidates remain clustered near the 20 percent support mark according to the latest polling data. That makes for unusually elevated uncertainty, particularly with eurosceptics accounting for half of the field. This may head off sellers through the end of the trading week, though finding conviction for an upside push may be challenging.

What will drive crude oil and gold price trends through mid-year? See our forecasts to find out!

GOLD TECHNICAL ANALYSISGold prices are digesting losses after recoiling from resistance near the $1300/oz figure, as expected. A break below trend line support at 1272.82 on a daily closing basis would mark a near-term trend reversal and initially target the 14.6% Fibonacci expansion at 1258.62. Critical resistance remains in the 1288.91-1308.00 area (trend line, April 17 high, former support).

Crude Oil Prices Extend Drop as OPEC Struggles with Reducing Glut

Chart created using TradingView

CRUDE OIL TECHNICAL ANALYSISCrude oil prices narrowly edged below support at 50.71, the 38.2% Fibonacci expansion, warning that further weakness may be ahead. From here, a daily close below the 50% level at 49.78 exposes the 48.55-85 area (trend line, 61.8% Fib). Alternatively, a move back above 50.71 opens the door for a retest of the 23.6% expansion at 51.87.

Crude Oil Prices Extend Drop as OPEC Struggles with Reducing Glut

Chart created using TradingView

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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