Article by: ETO Markets
The US oil market shows mixed signals regarding its tightness. On the bullish side, the number of active oil rigs in the US has increased for the fourth consecutive week, indicating potential growth in oil demand. Additionally, unexpected drawdowns in US crude oil inventories, reported by both API and EIA, suggest a tightening market. However, growing fuel inventories raise concerns that demand is not strong enough to absorb the available supply, casting doubt on the market's actual tightness. On the international supply side, the revocation of Chevron’s license to operate in Venezuela could reduce global oil supply, supporting higher prices. OPEC continues efforts to maintain production cuts, but prolonged restrictions may lead to a loss of market share, pressuring the group to reconsider its stance. A potential resolution of the Ukraine war and easing tensions in the Middle East could alleviate supply constraints, applying downward pressure on oil prices. Meanwhile, oil demand remains uncertain, with concerns over the US economy intensifying due to the Federal Reserve's restrictive monetary policy. Key upcoming economic indicators, such as the US GDP revision and ISM manufacturing PMI, could impact demand expectations. Similarly, the Chinese manufacturing sector’s performance, reflected in the NBS and Caixin PMI releases, will be critical for assessing global oil demand. At present, the demand side appears to be the dominant factor influencing oil prices.
Gold (XAU/USD) continues its decline for the second consecutive day, hitting a two-week low around the $…-… region during the Asian session on Friday. The US Dollar's (USD) recovery from its lowest level since December 10 is adding pressure to gold, fueled by expectations that the Federal Reserve will maintain its hawkish stance due to persistently high inflation. The strengthening USD is prompting flows away from the non-yielding yellow metal. Traders are awaiting the release of the US Personal Consumption Expenditure (PCE) Price Index data, which will provide insights into the Fed's potential rate-cut path. Despite this, ongoing uncertainty around US President Donald Trump's tariff plans, along with a risk-off sentiment in the market, could support gold as a safe-haven asset. Global market concerns are also driving down US Treasury yields, which could help limit gold's losses. Economic data, including a 2.3% GDP growth rate for Q4 2024 and rising inflation, further underpin the USD and diminish gold's appeal. The Fed's cautious stance on inflation continues to steer investor sentiment away from gold. With more tariff threats from Trump on the horizon, gold may find some support from heightened economic uncertainty.
From a technical perspective, the recent decline in gold (XAU/USD) has pushed the price below the 23.6% Fibonacci retracement level of the December-February rally. Oscillators on the daily chart are showing negative momentum, supporting the view of a continued corrective pullback from the all-time high. If the price breaks below the $…-… horizontal zone, it would confirm the bearish outlook, sending the price toward the next support level at $…. Further downside movement could lead to the 38.2% Fibonacci level around $…-…, followed by the $… mark. A decisive break below $... would signal a potential top for gold and open the door to more significant losses. On the other hand, if gold recovers and moves above the $… area (23.6% Fibonacci level), the first resistance zone would be around $…, followed by $…. A sustained move above $… could propel gold toward the $… area, with a further rally potentially targeting the all-time high around $…, encountering resistance at $… along the way.
WTI crude oil prices edged lower on Friday, trading around $69.90 per barrel during Asian hours, as concerns over global economic growth and fuel demand overshadowed supply-related factors. Despite gains in the previous session, crude oil remains on track for its first monthly decline since November, driven by Washington’s tariff threats and signs of a US economic slowdown. President Trump announced new tariffs, including a 25% duty on Mexican and Canadian goods and a 10% levy on Canadian energy imports, set to take effect on March 4, alongside additional tariffs on Chinese imports. Meanwhile, US economic indicators pointed to weakness, with Q4 GDP growth slowing to 2.3% from 3.1% in Q3 and weekly jobless claims rising significantly to a two-month high. Investors now await the PCE price index report for further insight into inflation trends. However, oil prices surged over 2% on Thursday after Trump revoked Chevron’s license to operate in Venezuela, potentially disrupting 240,000 barrels per day of Venezuelan oil exports. This could lead to negotiations between Chevron and PDVSA to redirect crude exports elsewhere. Meanwhile, OPEC+ is assessing whether to proceed with its planned oil output increase in April amid fresh US sanctions on Venezuela, Iran, and Russia. The group has until early March to finalize its production strategy, though no consensus has been reached yet.
From a technical perspective, WTI crude remains in a bearish trend after failing to break the $… resistance, forming a lower trough and reinforcing the downward trajectory. The RSI indicator between 50 and 30 signals bearish market sentiment, though price stabilization near the lower Bollinger band suggests a potential short-term correction. If bearish momentum continues, WTI may break below the $… support, potentially targeting $…, a level last seen in August 2021. Conversely, a bullish reversal would require breaking the downward trendline and surpassing $…, with further resistance at $….
