Oil drifting, gold steady

Oil drifts lower as prospect of OPEC+ cut fades

Oil prices are unsurprisingly taking another hit as risk sentiment turns negative once again. While OPEC+ pushing back their meeting to later in the week to analyse the Omicron data may have appeared to be a bullish signal for the markets, as it increased the likelihood of a pause or reduction in the output increases, I still don’t think that will turn out to be the case.

There’s being vigilant and there’s being hasty and I don’t think the group wants to be the latter. Even later in the week, there’s unlikely to be sufficient data to warrant such an important shift in their output when, by their own admission, they’d already factored Covid into their calculations before. And comments from Russia and Saudi Arabia this week appear to back that up.

Brent crude is closing in on USD 70 now – which looks a big support level – as traders continue to fret about the efficacy of the current vaccines and what it means for the global economy in the coming months. WTI has slipped below but could see some support around USD 67 after such a severe drop.

Gold edges higher but remains broadly stable

Gold has been remarkably stable this past week. Even Friday’s spike was quickly pared back and it hasn’t really moved since. It seems very unresponsive to shifts in risk appetite in the markets and even a softer dollar and lower yields are doing little to lift the yellow metal.

I can understand why it may not be soaring higher as I’m not convinced central banks can do much in the face of higher inflation, even if we see more lockdowns. But current price action seems to conflict with what we’re seeing elsewhere which is interesting, to say the least. It’s not a particularly bullish signal, nor is its struggle to get back above USD 1,800.

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