Oil remains extremely volatile ahead of tomorrow’s OPEC+ meeting when the group will decide if and how to respond to the Omicron news and last month’s coordinated SPR release by major consuming nations. On the latter, I don’t think there’ll be a direct retaliation – perhaps a warning – but it may feed into any decision-making on the new variant.
I still think the meeting has come too soon. That’s evident in the fact that it was pushed back by a couple of days in order to gather more data. And I’m not sure there’s enough at this stage to make an informed judgment. And if they had, by their own admission, factored in another wave this winter, then there should be no need to adjust at this stage. Although the SPR release may push some to support it anyway under the guise of an Omicron response.
With prices having fallen so far from the highs – around 20% – a one-month pause, for example, could see crude bounce back sharply and would discretely undo any benefit resulting from the SPR move.
Gold awaiting more data
Gold is really struggling for direction at the momentum, having repeatedly failed to generate any momentum above $1,800. It’s not in decline anymore but it can’t seem to make its mind up. The dollar easing in recent days and the huge amount of uncertainty in the markets should be giving it a lift but then we have seen near-term yields rising as the Fed has accepted more action may be necessary.
Perhaps like the rest of us, gold traders are simply waiting on more information before deciding where to head next. Choppy price action may be here to stay for now but the next couple of weeks will shed a light of light on what’s in store, at which point we should see gold find some direction once more.