Gold Market Wire
News, analysis and commentary for gold traders and investors
Crude Oil Market
Crude Oil Surges
December 28, 2021 - (Gold Market Wire) - Crude Oil is moving up strongly today, as the power uptrend holds and the 50-Day moving average gets cleared (intra-day only! - so far). On Brent, we have clocked a high just 15 cents short of $80 a barrel. The market's rise has been steep, but, so far, no pullback is in sight.
The power uptrend hasn't calmed down yet, and that is surely the sign that the market is taking the long break to wrong foot everyone. The regular crowd will come back from the holidays, maybe tomorrow - with the market some $6.00/bbl higher than when they left it. Holdays can be costly when war is lurking around the corner.
One of GMW's writers used to analyse the military demand for oil by NATO on an annual basis (for the NATO Handbook), way back - in the day, and, sure enough that research revealed one thing: When the military starts demanding oil for real operations the market gets very tight. This time around, any sign of conflict in Ukraine could get 'delicate' to say the least, because Russia controls so much oil within the world market. That hasn't been the case in any previous conflict. Russia could start to curtail deliveries to the West if things get heated, and there isn't a lot of 'incremental' output available, shouldRussia start curtailing exports to NATO nations. It's not unreasonable to assume this is part of the reason oil is heading up along the power trend line with no sign of turning down.
The diplomatic/military situation is one of concern, to say the least. America is in a highly unstable position politically on the domestic front, and Russia is aware of that. One must seriously ask, what would be the strategic advantage to letting America regain a stable domestic foothold before pressing what seems an obvious advatage. This must be part of the reason behind the demanding diplomatic language that Moscow is now using. Of course, Washington is not going to recognize any demands from Russia - at least not publically, but one would have to be ignorant indeed not to recognize that Moscow has drawn a red line around Ukraine. It will either be neutralized via agreement with Washington... or invaded and neutralized.
That is where we are at. A proper NATO challange to any military neutralization of Ukraine, via NATO membership for Kiev, will be met with a Russian invasion. Like Syria before it, and Georgia and Ossetia and Chechnya, Moscow considers Ukraine to be a line which it will not allow to be crossed. Somewhat akin to NATO allowing Greece to fall under Russia ageis. It is a non-starter. If conflict is intimated, Russia will invade with a ferocious force and take the country in a matter of days - presenting a fait accompli to the West.
These are uncertain days. Markets don't like uncertainty. Oil is heading higher.