Oil gathering momentum as Brent hits new highs

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Markets mixed as earnings season hots up

It’s been an interesting morning in financial markets, not that you’d guess that based on the mixed trade being seen across Asia and Europe.

US futures are pointing to a similar start on Wall Street as well, which you’d typically associate with light newsflow but what we’re currently seeing is anything but. We’re getting earnings reports from a large number of major firms and the report card for the US has so far been far better than expected. Another 62 S&P 500 companies will report including Amazon, Intel and Ford so we’re not going to be short of things to talk about.

Failed M&A deals is another common theme today, with the Sainsburys/ASDA merger being blocked by the CMA and talks between Deutsche Bank and Commerzbank being abandoned.

Oil gathering momentum as Brent hits new highs

Oil prices are on the rise again on Thursday, with the inventory data from API and then EIA over the last 48 hours merely causing a pause in the rally despite reporting large increases. It would appear traders are far more interested in oil waivers that were granted by the US to eight countries that expire in May, affecting up to a million barrels of oil purchases each day.

While it was reported that the US, Saudi Arabia and UAE will fill the void left by any shortfall, there are serious doubts about how and when this would be achieved. And when you consider the fact that two of the three are currently actively trying to curb output in order to rebalance the market and lift prices, you have to question the motivation to then step in and turn on the taps.

From a traders perspective, this means fresh six month highs in Brent crude, with WTI lagging slightly behind. What’s interesting is that momentum doesn’t appear to be lacking from the latest moves which suggests prices could continue to rise. Brent could face an interesting test around the $76-78 range, with WTI facing similar challenges around $67-69. Should these levels give way, it could be a very bullish signal for oil and recent moves suggest there is potential for this.

Gold bulls have reason to feel optimistic

Gold is trading in the green for a second day on Thursday, buoyed by some softness in the dollar. Gold bulls are also likely boosted by price action on Wednesday when the yellow metal made gains even as the greenback surged to a near two-year high. This is encouraged as the relationship between the two is usually negative but a stronger dollar failed to hold it back.

What’s more, the recent break below $1,280 failed to generate downward momentum and each time a new low has been made it’s quickly been bought into. That is hardly encouraging for those that hoped the breakout would bring about another wave of selling, especially against the backdrop of a stronger dollar. Hope is not entirely lost for bears though. Gold remains below $1,280 currently despite numerous tests which should be encouraging. What all this means is that $1,260 may in fact be a far more significant support level for the yellow metal, should it be tested.