Crude Oil Price Rise on US-Iran Spat, OPEC Output Cuts May Fizzle

CRUDE OIL & GOLD TALKING POINTS:

• Crude oil prices as Trump threatens Iran, OPEC mulls output cuts
• Gold prices recoil from $ 1300 / oz figure to test 9-month trend support
• Speech from US Fed Chair Powell might weigh on commodity prices

Crude oil prices jumped higher at the start of the trading week after US President Trump threatened Iran via Twitter, Tehran warning officials that if they want a fight, that will be the end of the Islamic Republic. Tensions between the two countries have been up since the US administration tightened sanctions on Iranian oil exports after withdrawing from an Obama era nuclear disarmament deal.

Prices were probably higher than OPEC members led by Saudi Arabia meeting in Jeddah desire to extend an output cut accord through year-end. Russia ̵[ads1]1; the leading non-OPEC producer participating in the scheme – may have other ideas however. Its energy minister Alexander Novak reportedly talked about relaxing restrictions, which expire next month if they are not renewed.

CRUDE OIL, GOLD PRICES MAY SUFFER AS FED CHAIR POWELL SPEAKS

The move higher may struggle to follow through as risk appetite falters. Scheduled comments from Fed Chair Jerome Powell headline and otherwise quiet offering on the economic calendar Monday. He is likely to recite the US central bank's preference for a wait-and-see approach, dashing traders' for easing to support sentiment amid slowing global growth and mounting political uncertainty.

Cycle-sensitive oil prices are likely to be lowered alongside stocks in this scenario. Gold prices may be falling – extending a four-day release streak – as a fading rate reduction prospects boost the US Dollar and Treasury bond yields. That is bad for the benchmark anti-fiat and non-interest-bearing asset. Markets currently price the probability of a cut before year-end at 73.5 percent.

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GOLD TECHNICAL ANALYSIS

Gold prices slumped back to test support at a rising trend line guiding them higher since mid-August 2018, now at 1273.01. This is reinforced by the 1260.80-63.76 inflection area. Breaking below the laughter threshold exposes the 1235.11-38.00 zone next. Near-term resistance is in the 1303.70-09.12 region, followed by a minor hurdle in the 1323.40-26.30 price band along the way to February's high at 1346.75.

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are pressuring the outer layer of a resistance bloc running from 63.59 and through 67.03. If buyers manage to overcome the upper bound of this hurdle, a test of the $ 70 / bbl figure may follow. Immediate support is at 60.39, with a reversal below that confirmed on a daily closing basis paving the way for a challenge of the 57.24-88 area.

COMMODITY TRADING RESOURCES

– – Written by Ilya Spivak, DailyFX.com Currency Strategist

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