Oil prices are rallying as OPEC+ has shown it is committed to keeping prices supported and on optimism China will continue to loosen Covid controls. Risk appetite on Wall Street is fading away and that might prevent crude prices from pushing much higher right now. The fear that the US economy is headed towards a recession will be a drag on all the pent-up demand that will be released on the China reopening.
OPEC+ decided to keep their production cut target unchanged despite the Russian oil price cap. Energy traders are waiting to see how Russia responds. One official noted that Russia would supply crude oil to Pakistan at a discount.
The crude demand outlook will remain volatile, and concerns are growing that the economic downturn across Europe is about to get worst. Saudi Aramco decreases its January oil prices for most of Europe.
WTI crude could be trying to form a trading range around the $80 to $85 barrel levels.
Gold is weakening alongside surging Treasury yields as the service part of the US economy remains robust. The risk of more Fed tightening due to strong wage pressures is clearly not going away. Gold has a nice run and investors will be quick to lock in profits if the bond market selloff accelerates. What should help gold this week is that it is mostly a quiet week until PPI and University of Michigan inflation expectations.
Gold looks like it will consolidate below the $1800 level but a sustained move lower could require a fresh inflationary catalyst.
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