CF: Oil Poised to Advance, Metals Threatened on US ISM Data
Oil to Extend Gains on US ISM, Cold Weather, Belarus Disruption
Crude Oil (WTI) $80.62 +$1.26 +1.59%
Oil prices have continued to edge higher, tightly hugging the upper boundary of a broken rising channel set from December’s swing low below the $70 level. From here, the bulls look poised to test resistance in the $80.33 – $81.06 congestion region. Fundamental catalysts for further gains are plentiful. The Financial Times has reported that a spat between Russia and Belarus over oil prices has seen the former country stop crude shipments to its smaller neighbor. The FT has said that flows to Europe have been unaffected for now, but the total implications from the disruption remain unclear. Forecasts calling for below-average temperatures in the US are also supportive, boosting heating fuel demand in the world’s largest oil-consuming market. Finally, the outlook for US economic recovery looks to be firming as a Credit Suisse gauge tracking the market’s priced-in interest rate expectations rose to the highest since October to show traders now expect the US Federal Reserve to add 108 basis points to borrowing costs over the next 12 months. Offering further help in this regard, the US ISM Manufacturing PMI figure is set to rise to 54.1 in December, showing the industrial sector expanded at the fastest pace since April 2006.
Gold, Silver Advance But US ISM Data May Stall Rebound
Gold $1110.75 +$13.43 +1.22%
Gold have broken above the upper boundary of a falling channel that had guided prices lower for much of December. Near-term resistance lines up at $1114.45 from here. The metal retains a strong inverse correlation with the outlook for US monetary policy (as expressed by the spread between Dec’2010 and Mar’2010 fed funds futures), which hints that tomorrow’s release of December’s ISM figure may prove to be a hurdle for continued bullish momentum.
Silver $17.14 +$0.25 +1.45%
Prices have extended a rebound from support at the bottom of a falling channel established earlier this month, moving back above the $17.00 handle. As with gold, a significant inverse correlation with the 2010 fed funds futures spread will mean that US ISM figures may check the bulls in the near-term.
