Investors Are Moving from Crude Towards Precious Metals
By looking at the falling crude prices one may think that investors are moving somewhere else. Those who bet earlier on rising crude prices are now holding their positions in precious metal contracts that have a potential to rise further.
So why are crude prices falling?
Firstly, we should note that after its last meeting OPEC+ decided that no additional increase of production, besides the one agreed on earlier of 400,000 barrels per day, would be made. Some countries suffering from elevated energy prices called on OPEC+ to increase oil production on top of the agreed amount. However, OPEC+ just rejected those calls. So, even reckoning makes lasting friends. Nobody wants to sacrifice their own economic interests for the sake of the others.
“The U.S could arrange a total effective SPR release of 45-60 million barrels by bringing forward next year’s 20 million barrels of mandated SPR sales, coupled with additional barrels on an exchange basis,” said Ed Morse, an oil analyst at Citigroup Inc.
We should also take into account that the Federal Reserve may speed up its decision to start the tapering processes earlier, in order to tackle record inflation after October figures jumped to 6.2% year-on-year, which is a record high that was last seen in 1991. Some crude prices could finish this week off with another decline, which would mean a third week in a row. The first drop of crude prices was recorded in the last days of October and broke the upward trend that was established on August 23. So far, the next support is located at $79.5-80.5 per barrel with the EMA55 moving average on the daily timeframe located together with the highs reached on the end of September and the beginning of October.
If we consider weekly timeframes, we may see a possibility of an even deeper decline to $76.30-77.00 per barrel. This target is indicated by the EMA21 moving average on the weekly timeframe chart together with highs of June-July of this year. The 50% correction from $86.70 per barrel is also located at $75.65 per barrel. The main resistance in this case is drawn by the line connecting peaks at $86.70 to $85.50 per barrel. Now it is crossing the $84.80 per barrel.
However, even a drop of Brent crude prices to $72.50-73.50 per barrel would not end the strong upward trend that started in April 2020. So, any crude prices dips are seen mostly as the correction after a strong long-lasting growth.
So why are crude prices falling?
Firstly, we should note that after its last meeting OPEC+ decided that no additional increase of production, besides the one agreed on earlier of 400,000 barrels per day, would be made. Some countries suffering from elevated energy prices called on OPEC+ to increase oil production on top of the agreed amount. However, OPEC+ just rejected those calls. So, even reckoning makes lasting friends. Nobody wants to sacrifice their own economic interests for the sake of the others.
“The U.S could arrange a total effective SPR release of 45-60 million barrels by bringing forward next year’s 20 million barrels of mandated SPR sales, coupled with additional barrels on an exchange basis,” said Ed Morse, an oil analyst at Citigroup Inc.
We should also take into account that the Federal Reserve may speed up its decision to start the tapering processes earlier, in order to tackle record inflation after October figures jumped to 6.2% year-on-year, which is a record high that was last seen in 1991. Some crude prices could finish this week off with another decline, which would mean a third week in a row. The first drop of crude prices was recorded in the last days of October and broke the upward trend that was established on August 23. So far, the next support is located at $79.5-80.5 per barrel with the EMA55 moving average on the daily timeframe located together with the highs reached on the end of September and the beginning of October.
If we consider weekly timeframes, we may see a possibility of an even deeper decline to $76.30-77.00 per barrel. This target is indicated by the EMA21 moving average on the weekly timeframe chart together with highs of June-July of this year. The 50% correction from $86.70 per barrel is also located at $75.65 per barrel. The main resistance in this case is drawn by the line connecting peaks at $86.70 to $85.50 per barrel. Now it is crossing the $84.80 per barrel.
However, even a drop of Brent crude prices to $72.50-73.50 per barrel would not end the strong upward trend that started in April 2020. So, any crude prices dips are seen mostly as the correction after a strong long-lasting growth.
