Oil choppy ahead of OPEC+ meeting
It’s been quite a choppy week in the oil markets, with progress having stalled just as Brent closed in on USD 80. A combination of profit-taking, higher inventory data and broader risk aversion has taken the heat out of the rally for now, but the outlook remains bullish. It pulled back to USD 76.50 before quickly finding support.
The energy crisis has made crude even more attractive and encouraged talk of USD 90, maybe even USD 100 oil. The natural gas shortage has seen prices soar – hitting levels equivalent to USD 190 a barrel of oil – and alternative sources are riding the wave higher. With the Chinese government ordering state-owned energy companies to secure winter supplies at any cost, the competition has just become fierce.
All of this makes the OPEC+ meeting next week all the more interesting. The group now has a decision on its hands. Does it maintain increases at 400,000 barrels per day, each month, or ramp them up and stop prices rising to unsustainable levels, further squeezing the global recovery. I think they’ll refrain from drastic action next week, although various scenarios will be discussed.
Gold back in favour?
Gold prices roared back on Thursday, moving back above USD 1,750 as the dollar and US yields eased a little. We may be seeing gold enjoy some safe-haven flows as the outlook becomes increasingly more uncertain. The yellow metal has been overlooked at times, with the dollar instead performing well and putting downward pressure on gold.
It will be interesting to see if it can maintain these gains if risk aversion continues in the coming weeks. Many obstacles remain to the upside which will make any ascent very challenging. The first of these is USD1,760 where it ran into resistance yesterday, followed by USD 1,780.
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