Triple Threat
Crude Oil – Worker unrest in Brazil and continuing geopolitical tension have inspired Crude Oil futures to test all-time highs. Workers at Petroleo Brasileiro SA are seeking pay for the day they returned after a two-week shift at an offshore rig and have threatened to strike as a result. In Nigeria, the Movement for the Emancipation of the Niger Delta, or MEND, is said to have called off its cease-fire agreement as of midnight on July 12. The group has threatened to attack British Oil interests after Prime Minister Gordon Brown pledged his nation's support to the Nigerian government. The group would also like the government to share more of its oil wealth with the poor inhabitants of the Niger Delta region. Hopes of improvements in Iran's talks with the West have been quashed by the country's recent test-firing of its long-range missiles. It's also an indication that the country expects to come under attack by either Israel or the U.S. at some point. The news out of Brazil is relatively minor for the petroleum market, but comes at an inopportune time, given the news out of Nigeria and Iran. Any agreement between workers and Petroleo Brasileiro SA would likely be seen as a trivial event unless things calm down in other parts of the world. In addition to the fundamental factors, this rally can be at least partially attributed to technicals, as the August contract was able to hold support at 135.50, which may have brought bulls back into the market after heavy profit-taking. Support comes in at 137.34, 133.04 and 130.64, while resistance can be found at 144.04, 146.44 and 150.74.
Gold – The explosive rally in Crude Oil and a weaker greenback have sent Gold higher this morning, potentially marking the fourth consecutive weekly gain in the precious metal. The climb for Gold has been slow and steady, as it has been overshadowed by the petroleum market and several food-based commodities. Given the economic uncertainty in the U.S. and abroad – not to mention the U.S. stock market officially confirming bear market conditions – traders may flock to the yellow metal as a safe haven investment. Some argue that given the economic conditions, Gold may even have more upside potential than petroleum due to the possibility of decreasing demand for energy products – a fairly bold statement in the wake of several major geopolitical events and the potential for precious metals to run into snags of their own. If conditions continue to worsen, jewelry demand may begin to wane and inflation may subside, causing Gold to lose its appeal as an inflation hedge. Technically, the August contract may be on the verge of a breakout above near-term highs of 950 and, more importantly, 964.30. Failure to advance beyond these levels may result in range-bound trading or possible sell-offs. Support comes in at 929.20, 916.40 and 906.40, while resistance can be found at 952.00, 962.00 and 974.80.
Rob Kurzatkowski, Commodity Analyst
