OIL: Crude Higher But Stabilises, Outlook For Gulf Flows Very Unclear

Oil prices are off their Monday lows but still down sharply after the US paused planned strikes on Iran to allow negotiations to take place. Iran’s IRIB news agency reported that Iran will only allow its route through Hormuz which if it stands by this position is going to make finding a compromise difficult. At the same time, President Trump won’t accept tolls through the waterway. While crude fell sharply on Monday, the situation in the Middle East remains fragile and highly uncertain and so energy markets are likely to remain volatile.

• WTI fell 5.4% to $80.06/bbl breaking below the 50-day EMA but off the intraday low at $78.43. This is still a correction with a clearer move below the EMA needed for a deeper retracement. Initial support is now at $77.78, 28 July low. It is currently around $80.00.
• Brent was down 4.8% to $83.70/bbl after opening at $81.55. It also broke below its 50-day EMA but needs a clearer breach to signal further declines. Initial support is at $80.67.
• Both Iranian and US officials deny there are direct talks but they appear to be taking place through mediators. Iran said it is currently only negotiating with Oman.
• According to Bloomberg, US shale producer Diamondback’s CEO Van’t Hof cautioned that elevated oil prices are likely to be the new normal given that countries have run down inventories to cover the supply shortage caused by the closure of the Strait of Hormuz and demand will remain robust to rebuild stockpiles, therefore “structurally” lifting the oil prices “floor”. 

The NZD/USD had a range overnight of 0.5860 - 0.5887, Asia is currently trading around 0.5870. The NZD has topped out above 0.5900 as the market absorbs the huge USD sales from the USD/JPY intervention, though its pullback continues to lag the rest of the market probably due to positioning. This surge at the back-end of last week would have hurt a market positioned the wrong way and I reckon we might have to do some work before it finds a clear direction again. Liquidity in the NZD can sometimes be an issue, so I will continue to watch if this bounce becomes anything more than that. I suspect we could chop around within a 0.5780-0.5920 range while it settles down.       

• WEDNESDAY - New Zealand Q2 Labour Market Report: Q2 labour market data are released 5 August and Q2 filled jobs suggest that employment may record the fourth consecutive quarter of growth but it’s still likely to be muted. This is consistent with ongoing excess capacity in NZ which is helping to limit firms’ pricing power and workers’ wage demands. Therefore Q2 wage growth is likely to remain contained.
• CFTC Data up to 28/07/2026 shows Asset Managers maintained their reduced core short positions in the NZD more meaningfully, -44 157(Last -43 615). The Leveraged community did likewise holding onto their core shorts, -30 606(Last -31 649). 
• Options : Closest significant option expiries for NY cut, based on DTCC data:  none. Upcoming Close Strikes : 0.5760(NZD307m Aug 5), 0.6100(NZD486m Aug 6) - BBG
• The NZD/USD Average True Range for the last 10 Trading days: 44 Points 

Fig 1: NZD CFTC Data

Source: MNI - Market News/Bloomberg Finance L.P

• It has been a slow start to August for Gold trading in a range of $4,019 - $ 4,120; tight by recent standards.
• Overnight was no different, trading in a range of $4,019 -$4,080 and finishing at $4,052 and gains of +0.29%
• Gold continues to trend near to the 20-day EMA of $4,073 looking for a catalyst.  
• The near term outlook is for much of the same as the FED looks to cool inflation which in turn has reduced expectations for near-term rate cuts.  This raises the opportunity cost of holding non-yielding gold. Investors are following suit with ETF inflows drying up as western investors shift capital toward high-yield fixed-income and tech-driven equities.
• For the day ahead look for gold to maintain a range of $4,000 to $4,100 

Fig 1:  Gold continues to trend near 20-day EMA

source:  Bloomberg Finance LP / MNI