Commodities and Cryptos: Oil falls, Nat Gas Squeeze, Gold breaks $1800, Bitcoin declines

Oil

WTI crude prices reversed earlier gains as the dollar surged following better-than-expected economic data that supported the idea that the economy can handle rapid Fed rate hikes. No one is questioning how tight the oil market remains, but there is some exhaustion after making fresh seven-year highs and that has led to some profit-taking. The developments in Ukraine have been constructive as diplomacy continues and while progress has not been made, a period of calm could perhaps have energy traders refrain from resorting to their buy every oil dip strategy.

The focus for many in the oil space will shift to the OPEC+ policy meeting next week which should be an easy meeting that delivers another modest production increase. The political pressure is growing for OPEC+ to deliver more barrels of crude, but they will likely stick to the expected increase of 400,000 bpd for March. With some OPEC+ members struggling to reach their quotas, any oil weakness should be limited.

Nat Gas

US natural gas prices surged over 70% for February delivery as short sellers may have gotten squeezed out ahead of February expiration. Many hedge funds were betting natural gas would go up as frigid weather sent demand soaring, but money managers were short.

Gold

Gold’s pain gets worse as investors grow pessimistic over how non-interest bearing assets may perform this year now that the Fed seems poised to deliver four or five rate hikes this year. Another round of economic data supported the tightening arguments as the US economy had the strongest year in decades, while omicron likely had a short-term impact on durable goods and pending home sales.

Gold is vulnerable to further technical selling now that the $1800 level has been breached, with $1760 providing key support. Risk aversion will eventually lead to some flows back into bullion, but that won’t happen until this selloff is over.

Bitcoin

Bitcoin’s rollercoaster ride is not over yet as risky assets take a hit on growing expectations that the Fed could be more aggressive tightening policy this year. The Fed got inflation wrong and the scramble to deliver interest rate hikes this year is sending the best performing assets during the pandemic tumbling. The Fed’s aggressive fight against inflation will ease once financial conditions are threatened and that is far away. The next couple of months will remain very choppy for crypto markets but the fundamentals still support a broadening formation for the top performing cryptos.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya