Oil surges as West tightens sanctions
Crude prices surged after the West delivered a stronger round of sanctions that raised the risk that Russian energy supplies could be next to get targeted. Energy traders are awaiting the US and allies to tap their strategic reserves, which could unleash 70 million barrels of oil. The oil market will remain very volatile as the risk of losing access to Russian energy supplies grows. The uncertainty over how the Ukraine war will unfold has too many risks that include nuclear threats, which means any oil price dips on any strategic release announcement will be short-lived.
Russia and Ukraine may have another round of talks, but it doesn’t seem like anyone is optimistic that a major de-escalation will happen anytime soon. OPEC+ is expected to stay with their gradual output increase strategy this week, ignoring global calls for increased output. Crude supplies are not increasing at a fast enough pace and the energy market is still very vulnerable to a massive shock. Brent crude still seems poised to make a strong run well above the USD 100 a barrel level over the short-term.
Gold in choppy waters
Gold prices are higher but are underperforming other commodities and cryptocurrencies. Gold is somewhat stuck at the USD 1900 level and that might persist until global growth concerns intensify. Gold will get its groove back once inflationary pressures threaten growth prospects. Stagflation will be the key word that gets tossed around and that should ultimately trigger safe-haven flows towards gold.
Gold investors looking for it to rally back towards USD 2000 will need to be patient. Gold could have one major shock if Russia is forced to offload some of its gold holdings. Gold should find strong support around the USD 1840-1850 area if bullish bets are pulled off the table.
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