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Crude Oil Prices May Fall Anew if Trump Sours Trade War Cheer

Crude Oil Prices May Fall Anew if Trump Sours Trade War Cheer

David Cottle, Analyst
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Gold and Crude Oil Talking Points:

  • Crude oil prices rose modestly from their heavy falls of the previous session
  • The market still looks very well supplied, with doubts increasing that traditional producers will cut output
  • Gold prices were weaker but underpinned by unrest in Hong Kong

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Crude oil prices edged modestly higher on Tuesday, after falls in the previous session, although investors remain largely in the dark about progress, if any, in US-China trade negotiations, still the markets’ key driver.

Energy markets are like all others awaiting a speech from US President Donald Trump at the Economic Club of New York later in the global session, with investors keen to see what he may have to say on the subject.

The latest White House commentary suggested that last week’s morale-boosting reports that the US was prepared to roll back some tariffs were overly optimistic, with no such move clearly imminent.

More specifically to the oil market, Monday brought news that Saudi Arabia had raised its output in October, although it kept supplies to the market below its output target under the auspices of the Organization of Petroleum Exporting Countries. The Omani energy minister reportedly said that OPEC might agree to extend the timing of production cuts when it meets next months but may not deepen them.

Gold prices were weaker, also looking toward Donald Trump’s speech, although continued violence and unrest in Hong Kong kept the lid on risk appetite and underpinned haven assets. The territory’s Chief Executive Carrie Lam branded protestors ‘selfish’ for paralyzing the city after one of the most difficult days of dissent so far.

Global investors will be keen to see whether the Reserve Bank of New Zealand cuts interest rates on Wednesday. Lower rates add to the relative appeal of non-yielding gold but there remains unusual certainty as to what the RBNZ will opt to do. The market is short of New Zealand Dollars and mildly biased towards a further reduction in borrowing costs. Tuesday’s weaker inflation expectations may have bolstered this view.

Crude Oil Technical Analysis

Prices appear to be wearing out a pennant formation on their monthly chart. This is usually seen as a ‘continuation’ pattern, meaning that, once it fades out, the market should return to its previous impulse.

US Crude Oil Prices, Monthly Chart

That might suggest a modest price upturn into year-end, but that might not chime with the fundamental picture while investors believe that the market looks extremely well-supplied.

Gold Technical Analysis

Spot prices have fallen for six daily sessions out of eight, as risk appetite has held up and the US Dollar has maintained its broad strength.

They’re now back down to levels not seen since early August.

Spot Gold Prices, Daily Chart

Near-term support is likely just below the current market at $1447.92/ounce, the closing high of July 18 and, below that in the $1413 area where prices bounced at the end of that same month.

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--- Written by David Cottle, DailyFX Research

Follow David on Twitter @DavidCottleFX or use the Comments section below to get in touch!

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