Oil showing volatility, gold rallies

So much uncertainty in the oil markets

It’s already been a very volatile week in oil markets and that’s unlikely to change over the coming days given the immense uncertainty over the Russian price cap, China’s Covid stance, and the OPEC+ meeting. The market is being led by speculation and leaks, of which there have been plenty and will likely be much more, which makes for very lively conditions given the wide array of possible outcomes.

And as you’d expect, all of the above are linked to varying degrees. A record surge in Covid cases is leading to tightening restrictions weighing on activity, spurring protests, and forcing a rethink of the country’s zero-Covid policy. They’ve also weighed heavily on prices with China being the world’s second-largest economy which will impact the demand forecasts from OPEC+ unless the group opts to hold on and await more clear signals and data.

Also influencing the group’s analysis will be Russian sanctions, most notably the price cap which is yet to be fully agreed upon. The latest rumours suggest the cap could be agreed to as low as $62 which is much lower than the $65-70 previously leaked and could therefore have a bigger impact on Russian output. And of course, Russia itself is a key member of the OPEC+ alliance, just to complicate matters further and could throw its weight around in those discussions and make an agreement harder and more uncertain.

Oh and the EU does have a tendency to make full use of deadlines, with the next sanctions due to come into force the day after OPEC+ meets, which is of course on a Sunday for some reason. Not that the alliance always comes to quick agreements and on this occasion, you could easily forgive them for not. Needless to say, this is certainly a recipe for volatile trading conditions.

Volatile and awaiting key US data

Gold is rallying again on Tuesday on the back of a softer dollar but has only largely wiped out Monday’s losses leaving it basically net even on the week. I expect to see plenty more volatility in the coming days given the amount of US economic data that are being released including inflation, GDP, and the jobs report. That sets us up nicely as we move into the final month of the year with only a couple of weeks to go until the hotly anticipated CPI inflation report and Fed meeting.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

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.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

Latest posts by Craig Erlam (see all)