Article by: ETO Markets
This week, in the crude oil market, oil prices have risen with the start of the New Year, influenced by several key developments. Outgoing President Biden signed an executive order banning offshore oil and gas drilling in specific US areas, such as the Northern Bering Sea Climate Resilience Area. This move has raised concerns over limitations for the incoming administration, which aims to increase energy production. However, President-elect Trump has vowed to overturn the ban, potentially boosting US oil production and pressuring prices if supply exceeds demand. Meanwhile, Saudi Arabia's crude oil exports to China are set to decrease in February, with shipments dropping to 43.5 million barrels from 46 million in January, reflecting potential economic struggles in China, as seen in weak December PMI figures. On the US front, a mixed oil market picture emerged: while API data showed a significant drawdown in crude inventories (-4.022 million barrels), signalling tightness and supporting prices, EIA figures indicated a smaller-than-expected drawdown (-0.959 million barrels), hinting at balanced production and demand. Overall, while demand has outpaced production recently, any reversal in this trend could exert downward pressure on oil prices.
Gold prices (XAU/USD) maintain a positive trajectory for the fourth consecutive day, trading near a four-week high amid persistent uncertainties surrounding US President-elect Donald Trump’s proposed tariffs and rising geopolitical risks. These factors bolster gold's appeal as a safe-haven asset, further supported by expectations that Trump's expansionary policies will fuel inflation, reinforcing gold's status as a hedge against rising prices. At the same time, the Federal Reserve’s cautious stance on interest rate cuts, with projections of only two quarter-point reductions in 2025, underpins elevated US Treasury yields and a robust US Dollar, limiting further gold price gains. Key Fed officials, including Susan Collins and Patrick Harker, emphasize a gradual, data-dependent approach to monetary easing as inflation shows signs of progress toward the 2% target, aided by a resilient labor market and steady economic growth. Meanwhile, traders remain cautious ahead of the US Nonfarm Payrolls (NFP) report, anticipated to reveal 160K job additions in December with an unchanged unemployment rate of 4.2%, potentially influencing gold’s momentum and broader market dynamics.
From a technical perspective, gold's breakout above the $… horizontal resistance this week signals a bullish shift, supported by strengthening oscillators on the daily chart. This suggests potential upside toward the $…-$… zone and possibly the $… psychological level. On the downside, pullbacks toward the $… swing low may attract buyers, with additional support at $… and the weekly low near $…-$…. A decisive break below the $… confluence, comprising the 100-day EMA and an ascending trend line from November's low, could mark a bearish reversal.
West Texas Intermediate (WTI) crude oil is trading around $…, with prices stabilizing as a stronger US Dollar offset concerns over supply disruptions. The USD’s strength, driven by the Federal Reserve’s cautious stance on interest rate cuts amid inflationary concerns and uncertainty around President-elect Donald Trump’s policies, pressures oil prices by making it more expensive for non-USD buyers. However, support for WTI comes from fears of supply disruptions, including upcoming US sanctions on Russian oil exports, and data showing a decline in US oil inventories, reflecting rising demand amid harsh winter conditions across the US, Europe, and Asia.
From a technical perspective, the daily chart of XTI/USD price is displaying a bullish trend, supported by the RSI indicator above … and an ascending trendline established since December 9, 2024. A continuation of this bullish outlook would require XTI/USD to stay above the $… support level and break above the $… resistance level, with a potential next target at $…. Conversely, a sideways movement is likely if the price remains between $… and $…. A bearish scenario could emerge if the price decisively breaks below $…, with the next support target at $….
