Oil powers higher, gold range-bound

Immense uncertainty

It was always shaping up to be a volatile week in oil markets and it’s certainly living up to that. Brent and WTI are up more than 2% on Wednesday as the EU continues to work towards an agreeable price cap on Russian crude and OPEC+ consider another large production cut this weekend.

Both carry significant uncertainty and a wide range of outcomes that should ensure oil remains volatile in the coming days, especially if both go into the weekend still up in the air. When OPEC+ can’t even commit to meeting in person, you know nothing is straightforward.

Despite rumours circulating of another possible two million barrel cut, it wouldn’t come as a surprise for OPEC+ to hold off on this occasion and wait until everything becomes clearer on the price cap and China. Nor would it be alarming for the alliance to wait a couple of extra days for details on the cap which could be more easily factored into its forecast and decision. This may be why they’ve opted for a virtual meeting as it offers more flexibility.

Rallying ahead of Powell’s appearance

Gold is benefiting from improved risk appetite as the dollar softens and US yields edge lower. It remains very much within the same range though, between $1730 support and $1,780 resistance as we await some major economic reports and, of course, the speech from Jerome Powell. Whether the Fed Chair will be so bold as to say something that could have a material impact on the yellow metal when there is some major data due over the next couple of weeks, I’m not so sure. But there’s certainly a risk he will and a break of either of these levels could be significant.

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