The price of crude is down more than 3% by the start of the New York trading session with a tug-of-war around $100 a barrel of WTI. And this is a rather remarkable market reaction, given reports that EU countries are dropping their veto on the Russian oil embargo one by one.
Germany, followed by Austria, Hungary, and Slovakia, have withdrawn their vetoes to ban oil purchases from Russia. Moreover, the German finance minister has pointed to the technical possibility of an immediate embargo.
This news, in practice, has not triggered a new wave of oil purchases by speculators. A stronger dollar and signs of slowing activity in China and the US continue to weigh on global demand for risky assets and oil.
Global investor wariness is preventing oil from making full use of market conditions, raising questions about the sustainability of the latest rally in December.
The signal for a break in the uptrend would be for oil to consolidate below the area of previous local lows at $95. However, one can draw a downtrend through the March and April peaks. Potentially, this situation leads to a strong move after exiting the two-month consolidation.
The week ahead is full of critical macro events that could throw the markets off their fragile balance, from the OPEC+ meeting and EU sanctions to the announcement of FOMC decisions and the monthly US employment statistics.
