Navigating the Swings: Analysing the Recent Volatility in the WTI Crude Oil Market

Gary Thomson, Chief Operating Officer FXOpen UK

The WTI Crude Oil market has experienced a rollercoaster ride in recent days, with a notable downturn in value raising concerns among investors and analysts.

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From a robust $77.71 per barrel on November 29, the market witnessed a significant plunge to just over $69.64 per barrel by December 6 at FXOpen. Analysts have described this decline as resembling a ‘freefall,’ employing dramatic language that underscores the severity of the recent market fluctuations.

However, in the wake of this precipitous drop, a mild recovery has emerged. As of the close of trading yesterday on the US market, WTI Oil prices climbed to $71.40 at FXOpen. While this represents a rebound from the low of late November, it still falls considerably short of the robust $77 range. The recent volatility underscores the unpredictable nature of the oil market in recent times.

Several factors have contributed to the recent selloff in oil commodities markets, highlighting the multifaceted influences at play. One significant factor is the market’s response to OPEC+ supply cuts announced in late November. The decision for these cuts to be voluntary rather than mandatory introduces a degree of uncertainty, potentially allowing OPEC countries to navigate individual commitments to reductions.

Geopolitical instability has historically been a driving force behind oil price volatility. In the current context of events in the Middle East, an intriguing observation emerges—there are no sanctions imposed on Western countries aligned with Israel. This contrasts with the situation in 1973 during the Yom Kippur War when oil supply shortages and rationing occurred due to sanctions. The diplomatic relations some OPEC nations have developed with Israel in recent years have shifted the dynamics of using energy restrictions as a bargaining tool.

The absence of sanctions against Western allies of Israel represents a departure from historical norms, reflecting the evolving geopolitical landscape. This divergence from past practices introduces a new set of expectations and contributes to the heightened volatility in the oil market.

In conclusion, the recent fluctuations in the WTI Crude Oil market reveal a complex interplay of factors, ranging from OPEC+ decisions to shifts in geopolitical dynamics. The absence of familiar geopolitical measures and the evolving nature of diplomatic relations contribute to the uncertainties that define the current oil market landscape. As market participants navigate these changes, volatility remains a defining characteristic, reinforcing the need for vigilance and adaptability in the face of an ever-changing energy market.

 

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This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

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